How do I draft an escalation clause?

What is an escalation clause and why is it important?

An escalation clause is a contract provision that allows for adjustments in price or terms based on certain conditions. It's important because it helps manage risks related to inflation or changes in market conditions.

How do I draft one for my lease agreement?

To draft an escalation clause for a lease, specify the conditions that trigger the escalation, such as increases in property taxes or maintenance costs, and outline how the adjustments will be calculated.

Can you give me an example of an escalation clause?

Sure! An example could be: 'The rent will increase by 3% annually or by the percentage increase in the Consumer Price Index, whichever is greater.'

What should I avoid when drafting an escalation clause?

Avoid vague language and ensure that the conditions for escalation are clear and specific. Also, be cautious about setting limits to prevent excessive increases.