• Jim Costa

Jim’s Rant For The Day. Hyperinflation Contract Protection Clause.

I was asked to prepare a lease contract for space in a hobby auto repair building for a tenant to maintain a hobby race car. Because we fear a hyperinflation may be ahead of us I searched for a model clause for that. I was surprised that no one has posted one yet. I had to create my own.

In doing it I did not want to fall prey to the government reported inflation rate so I substituted the rate definition to John’ Williams’ Shadow Government Statistics. After I wrote it I discovered the landlord would have to subscribe to Shadow Government statistics at a cost of $175 per year. So I changed the lease from a long term lease to a Month to Month lease for financial protection. Under the Month to Month method the rent amount can be reset each month if so needed.

If anyone needs it here is the clause I wrote:

Hyperinflation. In the event of unusual and significant changes in the Consumer Price Index (CPI), the monthly rent and penalty shall be adjusted accordingly. The CPI rate shall be determined by Shadow Government Statistics (1980 based) (Link). Each time the CPI increases 3% then beginning with the next month, rent payments and penalties shall be increased 3%, for each 3% increase of the CPI. At the date of signing the CPI is 14.5%.

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