A contractual provision increasing rent at specified intervals - fixed annual increases, CPI adjustments, or operating expense step-ups. Escalation provisions determine how fast a tenant's total rent grows over the lease term.
Fixed-step escalations are predictable (e.g., 3% annual bumps). CPI-linked escalations vary with inflation. In any lease, the total effective rent = base rent + CAM + escalations. Miscalculated escalation provisions result in overcharges or undercharges.
A lease specified "3% annual increases." The landlord applied the 3% increase to already-escalated rent each year (compounding) rather than to the original base rent (simple). Over 10 years, compounding produced rent 8% higher than a simple 3% schedule.
Clarify at lease signing whether escalations are compounded on the prior year's rent or calculated as a percentage of original base rent. Get the full rent schedule calculated and attached as a lease exhibit.
Ready to check your numbers? Start a free CAM scan.
Scan My Lease NowUpload two PDFs. 12 detection rules. Under 5 minutes. Free.
Start Free AuditThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.