Escalator Clause

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Escalator Clause

A stipulation contained in a union contract stating that wages will be raised or lowered, based upon an external standard such as the cost of living index. A term, ordinarily in a contract or lease, that provides for an increase in the money to be paid under certain conditions.

Escalator clauses frequently appear in business contracts to raise prices if the individual providing a particular service or type of merchandise is forced to pay more for labor or materials.

Such clauses are also often part of contracts or leases executed subject to price-control regulations. When this type of provision is in a lease, a landlord has the power to collect the maximum amount of rent allowed under rent regulations that are in effect at the time of the lease. The escalator clause provides that if the rent regulations are altered during the time of the lease, the tenant must pay the new rental fee computed pursuant to the revised regulations.

escalator clause

n. a provision in a lease or other agreement in which rent, installment payments or alimony, for example, will increase from time to time when the cost of living index (or a similar gauge) goes up. Often there is a maximum amount of increase ("cap") and seldom is there a provision for reduction if the cost of living goes down or for deflation instead of inflation. (See: cap)

References in periodicals archive ?
Drafting an effective escalation clause that is acceptable to a homeowner takes some skill.
Escalation clauses call for the rent of a newspaper publisher to increase to the same extent that inflation causes operating expenses for running the building to increase.
Escalation clauses in a contract of loan, or stipulations allowing an increase in the interest rate agreed upon by the contracting parties, are valid.
Leominster was looking for a three-year contract with the option for two additional years and a fuel escalation clause. Mr.
The application of this escalation clause however, would create an increase between the 9th and 10th year of the term of $1,662.00 per month!
Some in the industry are recommending that an "escalation clause" be included in contracts.
It is necessary to have a clearly worded escalation clause in the lease, and then to ensure that the calculations adhere completely to the terms of this clause.
There, the tenant commenced an action against the landlord seeking a declaration of its rights under an escalation clause in the lease.
Most commercial leases contain a tax escalation clause which provides that the tenant will pay as additional rent his proportionate share of any increase in real estate taxes on the entire building.