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Ratchet Clause - Hard vs Soft

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  • Ratchet Clause - Hard vs Soft

    Hi guys, was reading a valuation report for a property today and it says (under the part about leases) that the ratchet clause for one of the leases is 'soft'.

    I'm not sure I remember this correctly. But is a 'soft' ratchet clause the case when the rent can't go down below what it was at the commencement of the lease term and a 'hard' ratchet clause is when the rent can't go down below the last reviewed rent amount (which may be in the middle of a term)?

    Is that right?
    Squadly dinky do!

  • #2
    Hard cannot go down
    Soft can to the last ROR

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    • #3
      Oh OK, it used to say something like "Not less than the rent paid in the previous 12 months" right?

      So it seems the standard wording the latest ADLS Deed of Lease is 'soft' because it can go down to the last ROR. Sixth version 2012 (4). Clause 2.1 (d).

      Beano, do you ever change that clause? To make it into a hard ratchet?
      Squadly dinky do!

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      • #4
        Originally posted by Davo36 View Post
        Oh OK, it used to say something like "Not less than the rent paid in the previous 12 months" right?

        So it seems the standard wording the latest ADLS Deed of Lease is 'soft' because it can go down to the last ROR. Sixth version 2012 (4). Clause 2.1 (d).

        Beano, do you ever change that clause? To make it into a hard ratchet?
        Generally not as 99pc of my leases are not ver 6
        The bulk are ver 4 slightly modified to have demo clause and ground leases are not ADLS

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        • #5
          Beano why do you use version 4?

          And how do you manage to have demo clauses in your leases? Doesn't this make the tenants very nervous/reluctant to lease?
          Squadly dinky do!

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          • #6
            Originally posted by Davo36 View Post
            Beano why do you use version 4?

            And how do you manage to have demo clauses in your leases? Doesn't this make the tenants very nervous/reluctant to lease?
            Additional clause
            We do point out the clause out and there is a year notice
            But no , no tenant has refused to sign
            On a prospective tenant in beach road he is forced to move as translink (I believe) have told him the building is being demolished ...he has spent hundreds of thousands of dollars only a few years ago ...now all wasted ...so it does happen

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