Escalator Clause

Dictionary Says

Definition of 'Escalator Clause'


A contract provision allowing for one to pass an increase in costs to another party. Escalator clauses are usually related to influences beyond both parties control, such as inflation.

Also known as an "escalation clause".

Investopedia Says

Investopedia explains 'Escalator Clause'


Escalation clauses allow people to enter large or long-term contracts, while accounting for changes in the market or economy. For example, let's examine a possible arrangement for someone to rent an apartment. If housing prices are increasing rapidly, a landlord may be hesitant to sign a longer term rental agreement or lease, since he or she could lose out on the property's appreciation. By including an escalator clause, where rent can increase by a specified amount each period, the landlord can still benefit from current market conditions, while the renter can secure a long-term living arrangement.

comments powered by Disqus
Hot Definitions
  1. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  2. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  3. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  4. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  5. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  6. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
Trading Center