Property Management
What is 'rent escalation' in a commercial lease and why do landlords include it?
AA clause allowing tenants to pay rent late
BA lease provision that increases rent periodically — by a fixed amount, percentage, or inflation index — to keep pace with rising costs and market rents✓ Correct
CA sudden rent increase imposed without notice
DA clause that escalates rent when the building is sold
Explanation
Rent escalation clauses protect landlords from inflation and rising operating costs in long-term leases. Common escalation methods include: fixed annual increases (e.g., 3% per year), CPI-indexed increases, or predetermined step increases. Without escalation, long-term fixed rent can erode the landlord's purchasing power.
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