Indiana Commercial Rent Increase Rules: Landlord Guide

Effective since Indiana’s statehood on December 11, 1816, Indiana imposes no rent control on commercial properties, giving landlords complete flexibility to set and adjust rental rates. Foundational property rights are now governed by the recodified Indiana Code Title 32 (effective July 1, 2002), under which commercial rent increases are governed entirely by the lease agreement and general contract law principles.

No Rent Control for Commercial Properties

Official Law Citation: The rules and regulations outlined on this page are explicitly determined by general commercial contract law and Indiana's ban on rent control (IC 32-31-1-20)Preview unavailable.

Indiana has no statewide rent control for commercial or residential properties. For commercial leases, this means:

• Landlords may increase rent by any amount
• There are no percentage caps on increases
• No local municipality in Indiana has commercial rent control
• Increases are governed entirely by the lease agreement

Rent Increase Mechanisms in Commercial Leases

Fixed Escalations

The most straightforward approach - the lease specifies predetermined rent increases:

CPI-Based Escalations

Rent increases tied to the Consumer Price Index (CPI), typically:

• Based on the CPI-U (Consumer Price Index for All Urban Consumers)
• Calculated annually on the lease anniversary
• The lease specifies which CPI index to use (national, regional, or metropolitan)
• A floor (minimum increase, e.g., 2%) and ceiling (maximum, e.g., 5%) are often negotiated

Fair Market Value (FMV) Adjustments

For longer-term leases (10+ years), rent may be adjusted to fair market value at specified intervals:

• Typically every 5-10 years
• Determined by an independent appraisal or mutual agreement
• The lease should specify the appraisal process and dispute resolution
• A minimum rent floor protects the landlord from declining markets

Percentage Rent Common in retail leases, where rent includes:

• A base rent plus
• A percentage of the tenant's gross sales above a specified breakpoint
• The breakpoint is calculated as: Base Rent ÷ Percentage Rate = Natural Breakpoint

NNN Lease Cost Increases

In Triple Net (NNN) leases, the tenant absorbs operating cost increases directly, including:

• Property tax increases (often significant year-over-year)
• Insurance premium changes
• CAM cost increases (landscaping, snow removal, common area repairs)

While the base rent may increase at a fixed rate, the tenant's total occupancy cost can increase substantially due to rising operating expenses. The lease should address:

• CAM caps - a maximum annual increase percentage for controllable expenses
• Audit rights - the tenant's ability to review landlord expense records
• Exclusions - capital expenditures, management fees, and other items excluded from pass-throughs

Notice Requirements for Commercial Rent Increases

Prohibited Practices

While Indiana is landlord-friendly, commercial rent increases cannot be:

• Discriminatory - based on protected characteristics under federal and state law.
• In breach of the lease - contrary to the specific escalation or notice terms in the contract.
• Retaliatory - Note that while statutory retaliation protection (IC 32-31-8.5) is for residential tenants, commercial landlords must still avoid actions that breach the covenant of quiet enjoyment or implied contractual duties.

Best Practices for Commercial Landlords

1. Build escalation clauses into every lease - Don't rely on renewals to increase rent
2. Use CPI with a floor - Protects against periods of low or negative inflation
3. Cap NNN expense pass-throughs - Tenants prefer predictability; capped increases improve tenant satisfaction
4. Review market rates regularly - Ensure your rents remain competitive
5. Communicate increases clearly - Provide written notice well in advance
6. Document the basis for increases - CPI index values, appraisals, and expense reconciliations

How Landager Helps

Landager continually tracks lease terms, required compliance items, and strict accounting records - making it easy to stay compliant with Indiana regulations.

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