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Rachet clauses??

Discussion in 'Commercial Property' started by WAcountry, 6th Apr, 2016.

  1. WAcountry

    WAcountry New Member

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    Hi Everyone
    Just doing a due diligence on a property.
    Reading the lease, there's a ratchet clause on the market review(at the end of the 5 year term and before the 5 year option is taken up)
    The lease was written in 2014.
    My Western Australian lawyer claims that ratchet clauses are illegal in all states(the subject property is in Sydney)
    Is he right?


    Regards from W.A.
     
  2. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Not in NSW. Effectively you are limiting rent post market review to not less than current rent.
     
  3. Player

    Player Well-Known Member

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    Last edited: 6th Apr, 2016
    Leo2413 likes this.
  4. WAcountry

    WAcountry New Member

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    Player, it's a medical practice.
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    @WAcountry - as per @Player, ratchets are not permitted in retail leases (you may need to refer to the Retail Leases Act NSW to confirm if a medical practice may be deemed to have a retail lease due to location in a shopping centre).

    (I would question my solicitor if he was advising that ratchet clauses were not legal).
     
  6. Dazedmw

    Dazedmw Well-Known Member

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    Know you are talking about Syndey but in reference to the "all states" comment in Vic, ratchet clauses are prohibited under the Retail Leases Act 2003. If its a non Act lease (industrial, some retail etc) then a ratchet is fine.
     
  7. Chilliblue

    Chilliblue Well-Known Member

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    Most medical leases would be commercial and yes ratchet clauses are legal in those types of leases.

    In over 13 years of working in Healthecare properties I have never done nor seen one done as a retail lease.

    Send me a PM @WAcountry. Happy to assist.
     
  8. Luke T

    Luke T Well-Known Member

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    Talk to Dazz about this one - I remember he liked to include them in his leases .
    I personally would use it to cover myself ,but then would work out what was fair for both landlord and the tenant at renewal time. (and both were agreeable to to secure the long term lease)
    I have not experienced them in my retail commercial as mentioned earlier.
     
  9. JDM

    JDM Well-Known Member

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