Rent Increases - RPI

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    Rent Increases - RPI

    I am setting up an AST fixed for 12 months. There is a rent review clause reading;

    "If this tenancy extends for longer than twelve months, or shall have been extended by agreement for a period longer than twelve calendar months, then the amount rent shall be increased at the expiration of the first twelve calendar months and at the end of each successive period of twelve months (if the tenancy should continue for that long) by an amount of 2% over the retail price index (all items index) calculated from the month immediately prior to the rent review date, subject to a maximum increase of 6% per annum and the new rent thereby calculated will substitute the rent referred to in this agreement and will be paid from the anniversary by Standing Order as required under this agreement."

    I am just wondering how this would be calculated. Is it just a case of getting the previous month's RPI figure, adding 2% to it then multiplying it against the rent.

    So for example if I was reviewing a rent of £850 now;

    Last months RPI was 5.5%
    Add 2% = 7.7%
    7.7% X 850 = 65.45
    New rent is 850 + 65.45 = 915.45

    Apply 6% cap
    so 6% X 850 = 51
    New rent is 850 + 51 = 901

    Seems like a huge increase - is the rent review clause unfair or am I just not calculating it correctly?
    Last edited by Token; 10-04-2011, 17:14 PM. Reason: Realised I had not taken into account the 66% cap

    #2
    Originally posted by tony.kenyon@hotmail.com View Post
    by an amount of 2% over the retail price index (all items index)
    Just to be pedantic - if the RPI is 5%, 2% above it is 5.1% What you need to say is "two percentage points".

    Comment


      #3
      Originally posted by Snorkerz View Post
      Just to be pedantic - if the RPI is 5%, 2% above it is 5.1% What you need to say is "two percentage points".
      Thank for that. Is the simple calculation as I set out above, the way you would work out a rent rise under this TA - as I say it seems rather steep - I dont want to overcharge and risk loosing the tenants

      Comment


        #4
        To be honest it all seems a little over engineered to me. AND RPI + 2% is a bit steep. And certainly will be in a few more months when inflation hits about 15%! :-)

        My TA's simply say there will be an 'annual approx inflationary increase'. At the end of the day if anyone refused a fair increase they would find a S21 landing on their doormat quite quickly regardless of the wording in my tenancy.

        I am always dead fair and increase by circa 3% IF the market allows!

        And here's the key, the market doesn't always allow it.

        You have to carefully consider the tipping point at which they will move and leave you with a void.

        Comment


          #5
          I take a similar approach to jghomer, except that I state that there may be a rent increase of up to 5% at the end of the fixed term and thereafter up to once every 12 months.

          I too examine local market conditions and weigh that with how much I want to hold onto this tenant. More often than not I've tended not to want to rock the boat as most of my tenants have been trouble free. A couple of years ago, the rental market plummeted in my area and one of my places seemed very over priced. When the tenants handed in their notice I offered to drop the rent by 10%. They were happy with that and are still there today. I even nudged the rent back up a bit a year later.

          Which reminds me, they must be due another increase around now...
          IANAL (I am not a lawyer). Anything I say here is just an opinion, so should not be relied upon! Always check your facts with a professional who really knows their onions.

          Comment


            #6
            Rents (for houses) in my area have dropped £25 a month to £75 a month and there hasn't seen much movement in the past 4 months or so. Strangely though the rents for flats have remained constant and move quickly. The difference between a 2 bed flat and a 2 bed house in comparable areas are only £25 - £50 difference in price.

            Always good to have something like property-bee installed to see what is happening in your neck of the woods.

            In this climate I don't think an automatic equation for a rent increase is practical and should instead be negotiated at the time of renewal.
            I'm a good tenant with great landlords
            I'm also a living, breathing, fully cooked female.

            Comment


              #7
              Agree with jghomer and Grrr there is a balancing act to maintain and I wonder just how academic the rent review clause is, as I will be setting up a new TA every 12 months. I suppose putting some sort of rent review clause in the TA raises an expectation on the part of the tenants that the rent will go by by whatever amount and that it will not stay the same when a new contact is signed.

              Comment


                #8
                LOL don't worry, we Ts know our rent is going to go up sometimes. I would find your clause scary though.

                I wouldn't mind my LL getting in contact a few months before end of fixed term to negotiate the renewal. I appreciate that if I cannot meet the new rent and they cannot allow rent to remain the same that they would need to serve me notice at that time. I do want my LLs to make a profit from my home, but I do need to be able to afford it.
                I'm a good tenant with great landlords
                I'm also a living, breathing, fully cooked female.

                Comment


                  #9
                  Originally posted by Brb View Post
                  LOL don't worry, we Ts know our rent is going to go up sometimes. I would find your clause scary though.

                  I wouldn't mind my LL getting in contact a few months before end of fixed term to negotiate the renewal. I appreciate that if I cannot meet the new rent and they cannot allow rent to remain the same that they would need to serve me notice at that time. I do want my LLs to make a profit from my home, but I do need to be able to afford it.
                  The clause being 'scarry' is my initial reaction to it. I am a new LL and want to be fair but business like with my tenants and I posted this thread to try to discover some way of having a fair rent review clause in my TA

                  Comment


                    #10
                    Personally I feel you are over-worrying about this. If your agreement is silent on this then you only need to tell them the new rent when renewing. If they say they can't then you use S21. If they can then all fine and dandy and you all sign. If you allow tenancy to become periodic then you can up the rent using S13 (at least I think that's what it is, others will confirm or put me right).

                    Ensure you get the other things right. Vetting T properly. Don't fall for sob stories. Get a detailed inventory taken prior to tenancy taken up and get T to sign to agree with it. Take meter readings. These will save potential headaches later on. Protect the deposit and give prescribed info to T (obtain proof). T should see at viewing the EPC. You also need a gas certificate (for all gas appliances).

                    One thing that blew me away with current LLs. They sent me a welcome to your new home card with a cheque for a takeaway. I have privately rented the majority of my adult life and this truly touched me. Just a few weeks ago I got them a free boiler installed. A T and LL relationship can be a fine balancing act and I would never have done the warm-front scheme for previous LLs (as it is attached to my name so if I got social housing or another private let I couldn't apply for it again). Warmness can go a long way. (Actually if I won lottery, I would do a whole new refurb for them including new kitchen and bathroom before I gave house back after moving into dream house I'd gotten built).

                    Whilst there are bad Ts out there, there are also bad LLs and I've come across a few of those so do cherish these that are treating me decently.

                    Sorry I've rather rambled on....Asda delivered alcohol earlier and having first alcoholic drink this year!! shame he reversed into my car first *rollseyes*
                    I'm a good tenant with great landlords
                    I'm also a living, breathing, fully cooked female.

                    Comment


                      #11
                      Originally posted by Brb View Post
                      Personally I feel you are over-worrying about this. If your agreement is silent on this then you only need to tell them the new rent when renewing. If they say they can't then you use S21. If they can then all fine and dandy and you all sign. If you allow tenancy to become periodic then you can up the rent using S13 (at least I think that's what it is, others will confirm or put me right).

                      Ensure you get the other things right. Vetting T properly. Don't fall for sob stories. Get a detailed inventory taken prior to tenancy taken up and get T to sign to agree with it. Take meter readings. These will save potential headaches later on. Protect the deposit and give prescribed info to T (obtain proof). T should see at viewing the EPC. You also need a gas certificate (for all gas appliances).

                      One thing that blew me away with current LLs. They sent me a welcome to your new home card with a cheque for a takeaway. I have privately rented the majority of my adult life and this truly touched me. Just a few weeks ago I got them a free boiler installed. A T and LL relationship can be a fine balancing act and I would never have done the warm-front scheme for previous LLs (as it is attached to my name so if I got social housing or another private let I couldn't apply for it again). Warmness can go a long way. (Actually if I won lottery, I would do a whole new refurb for them including new kitchen and bathroom before I gave house back after moving into dream house I'd gotten built).

                      Whilst there are bad Ts out there, there are also bad LLs and I've come across a few of those so do cherish these that are treating me decently.

                      Sorry I've rather rambled on....Asda delivered alcohol earlier and having first alcoholic drink this year!! shame he reversed into my car first *rollseyes*

                      Really appreciate all the advice. Hope I can get as good a relationship with my Ts. Hope the alcohol doesnt run out too soon!

                      Comment


                        #12
                        Originally posted by Brb View Post
                        Personally I feel you are over-worrying about this. If your agreement is silent on this then you only need to tell them the new rent when renewing. If they say they can't then you use S21. If they can then all fine and dandy and you all sign. If you allow tenancy to become periodic then you can up the rent using S13 (at least I think that's what it is, others will confirm or put me right).

                        Ensure you get the other things right. Vetting T properly. Don't fall for sob stories. Get a detailed inventory taken prior to tenancy taken up and get T to sign to agree with it. Take meter readings. These will save potential headaches later on. Protect the deposit and give prescribed info to T (obtain proof). T should see at viewing the EPC. You also need a gas certificate (for all gas appliances).

                        One thing that blew me away with current LLs. They sent me a welcome to your new home card with a cheque for a takeaway. I have privately rented the majority of my adult life and this truly touched me. Just a few weeks ago I got them a free boiler installed. A T and LL relationship can be a fine balancing act and I would never have done the warm-front scheme for previous LLs (as it is attached to my name so if I got social housing or another private let I couldn't apply for it again). Warmness can go a long way. (Actually if I won lottery, I would do a whole new refurb for them including new kitchen and bathroom before I gave house back after moving into dream house I'd gotten built).

                        Whilst there are bad Ts out there, there are also bad LLs and I've come across a few of those so do cherish these that are treating me decently.

                        Sorry I've rather rambled on....Asda delivered alcohol earlier and having first alcoholic drink this year!! shame he reversed into my car first *rollseyes*
                        Thanks for all the advice. Agree thats its better to have a good relationship with tenants. Hope the alcohol doesnt run out too quickly!

                        Comment

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