Escalator Clause

Definition of Escalator Clause

In union contract, a provision that wages will rise or fall depending on some standard like the cost-of-living index. In lease, provision that rent may be increased to reflect increase in real estate taxes, operating costs, and even increases in Consumer Price Index. In construction contract, clause authorizing contractor to increase contract price should costs of labor or materials increase.

Clause in leases or contracts executed subject to price control regulations. Under this clause, in the case of a lease, the landlord is authorized to collect the maximum rent permissible under rent regulations in force at time of execution of the lease. The escalator part of the clause of the lease consists in the provision that in the event that the rent regulations are modified during the term of the lease, the tenant will pay the increased rental following the allowance thereof. See also Cost -of -living clause.

That's the definition of Escalator Clause in Black's Law Dictionary 6th Edition. Courtesy of Cekhukum.com.