Real Estate Glossary

What is Escalation?

Escalation is a clause in a contract that allows for the adjustment of a specified value or rate at predetermined intervals or under certain conditions. In real estate, an escalation clause is commonly used in commercial leases to provide for annual increases in rent based on a predetermined formula, such as the Consumer Price Index. This clause allows landlords to keep their rental income in line with inflation, while also providing tenants with a known, predictable increase in their rent.

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