ALA Certified Legal Manager Practice Exam

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What aspect of a lease does the escalation clause manage?

Subleasing terms

Renewal increases in base rent

The escalation clause in a lease specifically manages renewal increases in base rent, making it an important provision in long-term leasing agreements. This clause allows landlords to adjust the rent based on predetermined criteria during the lease term or at the renewal stage. This can be tied to external economic indicators such as the Consumer Price Index (CPI) or specific percentage increases.

Understanding escalation clauses is crucial for both landlords and tenants, as they provide clarity on how rent may increase, ensuring that both parties are aware of potential future costs. This protects landlords from inflationary pressures while allowing tenants to budget for anticipated rent increases over time. Thus, the correct answer accurately reflects the function of the escalation clause in managing base rent increases during lease renewals.

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