Option Rent Formula Calculator

Option rents use defined formulas. This calculator applies each.

Base year rent

CPI cumulative %

Market rent

Formula (1-4)

Option rent

$128,250

Premium vs current

$28,250

Premium %

28.25%

How the math works

Formula 1: base +5%. Formula 2: base × (1+CPI). Formula 3: market. Formula 4: 95% of market.

On $100k base with 22% CPI and $135k market: Fixed+5% = $105k. CPI = $122k. Market = $135k. 95% market = $128k. Formula 4 (95% FMR) splits difference — landlord captures most of the mark-to-market; tenant gets modest discount preserving option value.

How to Use

Enter base year rent.
Enter CPI cumulative %.
Enter market rent.
Enter option formula (1=fixed+5%, 2=CPI, 3=market, 4=95% of market).
Read option rent.

Frequently Asked Questions

Common formulas?

Fixed escalator at option (e.g., +5% from prior). CPI-indexed (tracks inflation). FMR (tied to market). 95% FMR (discount to market, preserves tenant value). Stepped schedule (e.g., yr1 option = $X, yr2 = $Y). Landlord prefers market; tenant prefers discount.

Which favors tenant?

95% FMR gives tenant material discount — valuable in hot markets. 90% even better. Fixed escalator: good when CPI exceeds escalator, bad when market rent falls behind escalator. Tenant negotiates favorable formula based on view of market.

Notice requirement?

Typical: 12-18 months before lease expiration. Late notice: option lost unless landlord waives. Tenant must diary carefully. Some leases allow 'deemed exercise' if tenant remains in possession — but this is rare and tenant shouldn't rely on it.