Question – I have a letting agency and am about to grant a new assured shorthold tenancy and the landlord has asked if I can include an RPI rent increase quarterly. Can I? No one has ever asked me before.
Answer – provided all parties agree, there is no reason you couldn’t include an RPI rent increase, but I would question the motives behind the rent increase as RPI increases don’t necessarily do what people think they do.
Sorry if I am teaching you to suck eggs but the RPI is simply an index showing the cost of living so effectively the idea is that on 01.01.21 it will show you the value of £500 and perhaps say the RPI is 1.9. If you look at the RPI on 01.01.22 it may have an index of 2.4. So if you take (£500/1.9)*2.4 the answer to this sum will give you a figure that, on 01.01.22, is the equivalent of £500 on 01.01.21 so you are effectively not getting any more money. This is fine if it is what the landlord intends.
If, though, the landlord’s intention is that he wants the rent paid to track the market so that if the rents payable increase the rent he received increases then RPI is not suitable. Instead, I would suggest that something like the Office of National Statistics index for private rentals would be better to track rental property rents movements. This is probably only appropriate though if the property is standard. If it is bespoke or niche then again it probably wouldn’t be right to have it valued against an index that is taking into account every terrace houses rents in the area so, in that situation, you would probably be better off simply including a market rent review with dispute resolution provisions…upside is that would be more work for the letting agent!
