Rent review issue

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    #16
    Yes i agree on the Calderbank. We see no reason to compromise. If the tenant had genuinely tried to negotiate we would have likely delayed the increase for a year as we were conscious that the tenants business was struggling. However, what we got was acusations of criminality and were told we were just greedy. As it stands now the tenant has not paid any of the rent due on December 25th for the current quarter. He has also told us he has no intention of paying anymore rent and that he will remain in the property until February and we can offset the 2 month deposit against this period in lieu of rent. It will be interesting to see what our solicitor says. I assume they will suggest that due to the complete breakdown in relations we should forfeit the lease and peaceably re-enter the property and re-let to another tenant. Thanks for all the advice.

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      #17
      If going for an RPI lease for your next tenant suggest to your solicitor he simplifies the RPI clauses. Starting from scratch with a precedent from a book would not be a bad idea.

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        #18
        This saga may end up in Court, with the tenant changing its mind and wanting to stay. Therefore I recommend you extract the office rpi figures and set out your calculations in the form of a letter, offering to settle at a few pounds less than your arithmetical calcs. Then if you do end up in Court the Judge will see that you have been reasonable. If you can rescue the buisness relationship so much the better. Invariably, almost, a change of tenant involves some work and costs. Try to work things out if you can, it pays in the end to be very reasonable; word gets round

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          #19
          It does not though generally pay to give in to unreasonable requests. Give them an inch...

          By agreeing an increase lower than provided for you risk setting a precedent.

          Reasonableness does not really come into it. If you have a lease which provides for a rent of £10,000 p.a. during the first three years and £11,000 during the last three years you are not being unreasonable in requiring £11,000 to be paid during the last three years. The principle is the same here - it is just that the amount of the increase is not known at the outset, just how it is to be arrived at. An RPI increase is not unreasonable and is in any event what the parties agreed. It is something of a risk for both parties. If rents go up generally by more than inflation the landlord looses out. If rents generally go down or go up by less than inflation the tenant loses out. That is why it is not generally recommended to go fo RPI increases unless the term is seven years or less or the lease contains a provision to rebase the rent to a market rent at intervals less frequent that the RPI increases.

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            #20
            "I do know though that a Calderbank letter needs to comply with certain requirements and that one of them is that it contains a genuine compromise. Compromise is not applicable here…"

            A Calderbank is a without prejudice offer to compromise on the issue of costs. Compromise is applicable here because if the third party expert were asked to determine the rent review per the formula for its calculation then the expert's costs would have to be payable. Assuming the landlord would want the tenant to bear all costs it would make sense to make a Calderbank offer accordingly.

            A Calderbank offer comprises two stages, the second of which only applies if the conditions in the first are not met.

            Firstly that the rent offered is £x and if accepted by the date/time specified then that offer would be the rent and each party would be responsible for half of any third party costs incurred to that date. If not accepted by the specified date then the second stage would apply, namely that after the rent has been determined by the third party then the offer could be disclosed on the matter of costs but not otherwise.

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              #21
              A Calderbank offer is a special type of offer. It allows a party to make an offer which is without prejudice except as to costs. That is you can make the offer and then withdraw it. If you do withdraw it, it cannot be produced in court as evidence of your offer. However, if the other party held out for more and failed to get it you can, when arguing costs, point it out and produce the letter and ask for your costs after the offer was made to be paid.

              A Calderbank letter may be useful where the amount in dispute is unfixed - for example damages for personal injury or, of course, the rent to be reviewed under a lease. It is of no use where the sum is certain. A sum is not only certain if it is expressed in a form such as "£10,000", but also if it is expressed in a form which enables it to be detemined by a calculation the parts of which are certain when the calculation is to be made.

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                #22
                although one might think RPI linked leases give no room for maneouvre/negotiation; my experience is not so. Admittedly its rare but there was an occasion where RPI actually fell and this does result in possible differences in how the RPI linkage is calculated; which is why I would encourage making an offer just a touch below what it should actually be. If its agreed everyone walks away happy.

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                  #23
                  A properly drafted RPI rent increase clause should have two elements. One is the main part which sets out when the rent is to go up and how the increase is to be calculated with reference to the RPI; it should also provide for what happens if over the relevant period the RPI goes down. The other is the subsidiary part which sets out what is to happen if the RPI is rebased, its constituents altered or it is abolished. Any provision which allows reference to a third party in the event of dispute should be restricted to the subsidiary part only.

                  One of the main attractions of RPI increases is that it avoids negotiation and any delay in the increase taking effect. It avoids the awkward situation which can arise, particularly with low value premises, where the tenant declines to negotiate knowing the landlord can only secure an increase by bringing in a third party. If there is any dispute as to the correctness of the calculation, that needs to be hammered out between the parties. Assuming the clause is properly drafted and the subsidiary parts do not kick in, there can only ever be one answer so you do not need an expert to weigh anything up and come to a conclusion.

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                    #24
                    My solicitor responded and he agrees that appointment of surveyor is what should happen if no agreement can be found. Funnily enough he hasn’t said the whole clause is badly drafted but then I never expected them to do so as they drew it up. Next steps are to make the tenant an offer to settle and continue as before. If they don’t accept this offer within 7 day we will likely forfeit the lease. Although, our solicitor is concerned we may have waived this right by communicating with the tenant on some documents related to the service charge account after we were aware they had not paid the rent. Hope this is not the case. It seems crazy if it were the case.

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                      #25
                      Originally posted by Charlie16 View Post
                      My solicitor responded and he agrees that appointment of surveyor is what should happen if no agreement can be found.
                      What does he mean by that? Is he saying that if the tenant does not like the result obtained by the formula or considers an incorrect calculation has been made that the tenant can call in a third party? That is not what an RPI clause should do. What it should do is obviate the need for negotiation and leave the new rent in no doubt so long as the RPI has not been messed about with. Either your solicitor has got it right or he has not. If he has got it right he should not be telling you to negotiate because the amount of the new rent is unarguable. Instead of negotiating he should be putting the tenant right.

                      He may well be right about you having unintentionally waived the right to forfeit. It depends on exactly what you said. The basic principle is that the right to forfeit is lost if you do anything which indicates an intention to maintain the tenancy.

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