What is a lease escalator?

• A. A clause that increases rent at set intervals, often tied to an index or fixed percentage
• B. A clause that permanently freezes rent
• C. A clause that reduces rent if vacancy increases
• D. A clause that changes property taxes

Answer: (A)

A lease escalator is a clause that increases rent at predetermined intervals, often tied to an index like the Consumer Price Index or to a fixed percentage. This setup helps landlords keep rent in line with inflation and rising operating costs, while giving tenants a predictable schedule of payments over the term. For example, rent might rise 2% each year or increase in step with CPI. A permanent rent freeze would keep amounts the same, which is the opposite of an escalator. A clause that reduces rent if vacancy increases would be a concession or relief measure, not an automatic upward step. A clause that changes property taxes addresses tax payments, which is a separate effect from the rent escalator, though some leases include tax provisions in addition to rent escalators.