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)

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Drafting an effective escalation clause that is acceptable to a homeowner takes some skill.
As recently as a few years ago, landlords were in the practice of tying escalation clauses to the Consumer Price Index, a popular figure that reflects inflation.
Leominster was looking for a three-year contract with the option for two additional years and a fuel escalation clause.
The application of this escalation clause however, would create an increase between the 9th and 10th year of the term of $1,662.
There, the tenant commenced an action against the landlord seeking a declaration of its rights under an escalation clause in the lease.
To the market-related risk calculation by the group for the period between tender and the award into perspective comes a price escalation clause applies.
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.
Shapiro explained the parties are battling over a "market rent" escalation clause that set the rent for the two-year period beginning February of 1994.
In addition, there was an increase in rental fees due to escalation clauses in existing lease agreements.
Also, compare current prevailing prices, escalation clauses, pass-throughs, inflation adjustments, up-front fees, cancellation fees and penalties.
and in their contracts with oil companies the price escalation clauses are benchmarked to indexes that we [ucg] generate.
About 18 percent of all builders now use such contracts, and escalation clauses are most common for small builders (23 percent).