Real Estate Update: Index Clauses In Commercial And Residential Leases: Faq For Landlords And Tenants

• Published date: 15 December 2022
• Subject Matter: Real Estate and Construction, Real Estate, Landlord & Tenant - Leases
• Law Firm: McDermott Will & Emery
• Author: Dr. Jens Ortmanns, Frank Müller, Johannes Honzen and Tina Knecht

An index clause, also known as a value protection clause, can be found in many commercial leases. An index clause is intended to compensate for changes in value due to inflation and deflation, both to the benefit and detriment of the landlord and tenant. For many years, indexation clauses led to only minor changes in rent. For example, the consumer price index for Germany (CPI) rose by only around 1.48% p.a. in the period between October 2015 and September 2021. Since October 2021, the picture has changed significantly: Increases in the CPI of around 9.5% p.a. in the period between October 2021 and October 2022 have in many cases resulted in rent adjustments of the same amount.

The issue of indexation is thus more...