Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What does a rent escalator guarantee in terms of rent payments?

1. Random increases without notice

2. Increases through negotiation

3. Scheduled rent increases without negotiation

4. Reductions in rent over time

The correct answer is: Scheduled rent increases without negotiation

A rent escalator provision in a lease agreement specifies a predetermined schedule of rent increases over time. This means that both the landlord and tenant agree in advance on the timing and the amount of these increases, eliminating uncertainties and avoiding the need for negotiation each time the rent is due for adjustment. Such arrangements help both parties financially plan for the future. Scheduled increases can be based on various factors, such as inflation indices or specified percentages, which can provide the tenant with a clear understanding of their financial obligations throughout the lease term. This contrasts with the other possibilities, like random increases without notice, which would create uncertainty for the tenant, or requiring negotiation for every increase, which can lead to disputes and confusion. Additionally, the notion of rent reductions over time typically runs counter to standard rental agreements, as they usually reflect an increasing cost due to market conditions and inflation.