We recently spoke to a tenant that received a rent review notice from their landlord. They did the right thing and contacted Olawill as soon as they received the notice. Upon reviewing the notice and the lease, I noticed 3 things:
1️⃣ The tenant did the right thing by contacting us as soon as possible, this is because time was not of the essence in the rent review clause, which means the rent review is not bound by time to complete but the longer the rent review is not dealt with, the higher the back rent (the difference between any increase in rent and the current rent).
2️⃣ I realized that the rent review clause had a “greater of” “Retail Price Index” (RPI) and “Open Market Rental Value” (OMRV) mechanism – this means that there is a minimum that the rent will increase by. This clause is structured so that if the open market rent is higher than the fixed increase, it would increase to the market rent, and if the % change in RPI since the last rent review is higher, thenthe rent will be increased by that.
3️⃣ I knew the area the property was situated in well and understood the rental tones – so from that I could judge that the market rent was significantly lower than the proposed rent included in the rent review notice, but after doing the calculations using the fixed RPI increase, the rental uplift was up to a 10% higher than the market rent. This was due to the current record-high inflation numbers in RPI.
This case was more of a cautionary tale for agreeing to “higher-of” rent reviews than an opportunity to settle a rent review in favour of my client. In your lease discussions, if you bring in a surveyor like Olawill early on, we can help you navigate clauses like these, for example, inputting a cap and collar to the RPI so your liability is limited or negotiating other terms in your favour to balance out the effect of this onerous clause.
It might seem insignificant at the time of lease negotiations (this lease was agreed before the days of high inflation), but a surveyor can really explain and game out the life of your lease to advise on terms that should be fair and balanced.
Contact us today to today for lease advise you can trust @ sales@olawill.co.uk
Need more info about RPI ren reviews?, here’s an article I made earlier:
https://www.linkedin.com/pulse/what-does-high-inflation-mean-rent-reviews-ola-alade-mrics?utm_source=share&utm_medium=member_android&utm_campaign=share_via
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