Autumn is when many landlords start planning January rent increases. If your lease has an inflation clause, you don't get to pick a number. The contract has already decided it, and your job is to read it correctly and do the maths.

It matters more than usual this year. In Hungary, annual inflation was just 1.3% in August 2026, while advertised rents were 5.0% higher than a year earlier. An index clause lets you raise the rent by what the index shows, not by what the market is doing. Here's how it works, for both landlords and tenants.

What an index clause actually does

An inflation-linked (or indexed) rent clause ties the rent to a published price index, usually a consumer price index (CPI). When the index goes up, the rent can go up by the same proportion. Depending on the wording and the country, the rent may also come down when the index falls.

A good clause answers four questions:

  1. Which index? It should name the publisher and the exact series, for example "the annual average consumer price index published by the Hungarian Central Statistical Office (KSH)" or "the consumer price index for Germany (VPI) published by Destatis".
  2. Which period? Is it the annual average for the previous year, the year-on-year change for a specific month, or the change between two monthly index values?
  3. When and how often? For example, once a year from 1 January, or no earlier than 12 months after the last change.
  4. How is it communicated? In writing, by a set deadline, with the figures shown.

If any of these is missing, you have a vague clause, and vague clauses cause disputes.

The formula

The general calculation is simple:

new rent = old rent × current index ÷ base index

The base index is the value at the time of the last adjustment (or when the lease started, if the rent has never changed). The current index is the latest value the clause points to.

Example 1: a percentage figure (common in Hungary)

The clause says: "From 1 January each year, the rent rises by the previous year's annual average inflation published by KSH."

  • Current rent: 200,000 HUF
  • KSH annual average inflation for 2025: 4.4%
  • New rent: 200,000 × 1.044 = 208,800 HUF

In index terms, that's the same as 200,000 × 104.4 ÷ 100.

Example 2: index points (the German approach)

The clause links the rent to the VPI. The numbers below are illustrative only, not real VPI values.

  • Current base rent: €800
  • VPI at the last adjustment: 118.0
  • Latest VPI: 121.5
  • New rent: 800 × 121.5 ÷ 118.0 = €823.73

Note that the index rose by 3.5 points, but by about 2.97 percent. Treating points as percent is one of the most common errors.

Only the base rent is indexed

The clause applies to the base rent, meaning the payment for using the property. Utilities, service charges and operating-cost advances are a separate matter. They follow actual costs and their own settlement rules, not the CPI. If your lease shows a single all-in amount, separate the rent from the cost element before you calculate, or you'll end up indexing the gas bill too.

How often can the rent change?

That depends on the contract and on national law. Most leases allow one adjustment a year, often from 1 January or from the lease anniversary. Some countries set a minimum interval by law (see the German note below). A clause cannot work retroactively: if you forgot to apply last year's increase, check with a lawyer before trying to collect it.

There's a practical timing problem in Hungary too. If the clause refers to the previous year's average and the increase is due on 1 January, the 2026 average won't be known until KSH publishes the December figures in mid-January 2027. Agree in advance how to handle this: either the new rent applies from February, or the January difference is settled once the figure is out.

Giving notice: show your working

Even where the law doesn't require a set format, put the increase in writing and include:

  • the clause you're relying on,
  • the index and period used, with a link to the official source,
  • the old rent, the base and current index values (or the percentage) and the result,
  • the date from which the new rent is payable.

A tenant who can check the calculation in two minutes rarely disputes it. Keep a copy of the notice and proof of when it was sent. In LeasingTrack you can keep the notice in the property's documents and send it to the tenant through the messages for that lease, so it stays with the lease and its payment history.

What happens when inflation falls?

There are two different situations:

  • Inflation slows but stays positive (prices still rising, just more slowly). The rent still goes up, only by less. A drop from 4.4% to around 1–2% means a smaller increase, not a freeze.
  • The index actually falls (deflation). Whether the rent must then go down depends on the clause and the law. Some clauses only allow increases. In Germany an index rent works in both directions, and terms that put the tenant at a disadvantage are invalid.

And if the market is rising faster than the index, as in Hungary in 2026, the clause doesn't let you go beyond the index. Charging more needs the tenant's agreement or a new contract.

Common mistakes

  • Vague wording. "The rent follows inflation" doesn't say which index or which period.
  • The wrong period. In Hungary, the year-on-year figure for December 2025 was 3.3%, while the 2025 annual average was 4.4%. If the clause says "annual average", the December figure is wrong, even though both numbers are "inflation for 2025".
  • Mixing up points and percentages. Always divide, never subtract.
  • Indexing from the wrong base. Use the index value at the last adjustment, not the one at lease signing, if the rent has changed since.
  • Missed or informal notice. A text message saying "rent goes up in January" with no figures invites a dispute and may not be valid.
  • Indexing utilities. Only the base rent follows the index.

Country notes

Hungary

Hungarian law leaves the details largely to the contract, so the wording is what counts. Many leases use the previous year's KSH annual average, which was 4.4% for 2025. The next monthly CPI release, for September 2026, is scheduled for 7 October 2026. Monthly releases don't change the annual average a clause refers to until the full year is published.

Germany

Index rents (Indexmiete) are governed by §557b BGB:

  • only the consumer price index for Germany published by the Federal Statistical Office (Destatis) is allowed,
  • the rent must stay unchanged for at least one year between adjustments (apart from modernisation and operating-cost changes under §§559–560),
  • the change has to be claimed in text form, stating the index change and the new rent or the increase in euros. The new rent is payable from the start of the month after next once the notice is received. For example, a notice received on 10 November takes effect from 1 January,
  • ordinary increases to the local comparative rent are excluded while the index rent applies.

A reform is on the way but not yet in force. On 29 April 2026 the federal cabinet approved the "Mietrecht II" draft. In tight housing markets, the part of any annual index rise above 3% would count only by half: a 5% rise would allow a 4% increase. As of early October 2026 the bill is still before the Bundestag, so the current rules apply until it passes.

Elsewhere

Other countries use their own national CPI and their own rules on frequency, caps and notice. Some cap increases by law, and some apply rules to residential leases that differ from commercial ones. Check the local rules before relying on a clause written for another market.

Before you send the letter

Read the clause word by word, find the exact official figure it refers to, and show your calculation. If anything is unclear, such as an old or ambiguous clause, a falling index or a missed adjustment, have a lawyer or accountant look at your contract before you act. This article explains the general principles; it isn't legal advice for your specific lease.