1. In Construction, this is an allowance to change the contracted price for labor, material, etc., based on a change in market prices or a consumer price index (CPI) as a benchmark. Provision in a contract. 2. In Leasing, this allows raising rent if maintenance and operation cost rise. Provision in property lease agreements. 3. In Lending this allows the raising of interest rate if a market ceiling for interest rates is met, or if another event, like the fall in the borrower credit rating, happens. Known also as escalator clause. Provision in loan agreements.
What is ESCALATION CLAUSE?
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