Residential Rent Increase RPI or OMV

by Readers Question

10:11 AM, 13th June 2017
About 4 years ago

Residential Rent Increase RPI or OMV

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Residential Rent Increase RPI or OMV

Hi Guys, got an interesting one I am trying to work out the method to be used to review the rent. The residential property has a Lease of 43 years, with yearly reviews but I cannot workout from the clause what method is used to review the rent.

The clause reads
‘On each of the Review Dates the Rent (being the rent payable per calendar month) shall be adjusted to be equal to any percentage increase, as measured on an annual basis from the date of the commencement of the Tenant’s occupation of the Property under the terms of this Lease, in the sum of any housing benefit or equivalent state or other benefit which is receivable by the Tenant in respect of his occupation of the Property.

I’m sure this is probably obvious to most, but I cant get my head around it.

Any and all help appreciated.

Gareth

Comments

terry sullivan

16:29 PM, 13th June 2017
About 4 years ago

Reply to the comment left by "Puzzler " at "13/06/2017 - 14:01":

but is not all benefits capped at £23000 in london and £20000 elsewhere

however i would go for cpi

Sam Addison

17:29 PM, 13th June 2017
About 4 years ago

Reply to the comment left by "Gareth White" at "13/06/2017 - 16:26":

Yes, I see your point Gareth.
In that case you are going to have to find out, probably from your local council, what the rates of housing benefits (or equivalent) were when the tenancy started for that property type/location, what they are now, and where you can find out what they will be in the future. Someone will correct me if I am wrong but it appears to me that housing benefit varies between areas. On top of that I found the following :-
https://www.theguardian.com/uk/2012/dec/05/housing-benefit-inflation-autumn-statement
(from 2014 housing benefit to go up by only 1%p.a. for 2 years) and
http://blog.shelter.org.uk/2015/07/budget-2015-unpicking-the-unravelling-of-housing-benefit/
(local Housing Allowance frozen for four years from 2015).

Puzzler

20:15 PM, 13th June 2017
About 4 years ago

It's just a measure of inflation (and I doubt deflation would be applied to benefits). There will be a GOV.UK site for it I am sure but yes you are stuck with it I am afraid. This should have been explained to you on purchase - but I know a lot of people don't pay enough attention when purchasing. When I started I didn't know the questions to ask.

Puzzler

22:14 PM, 13th June 2017
About 4 years ago

On the other hand, if you are not yet the owner you should be able to a price which takes this into account. Can you clarify the 43 year lease? Is this protected tenancy and if so, how come it is specific as to term?

Michael Barnes

10:05 AM, 14th June 2017
About 4 years ago

Reply to the comment left by "Gareth White" at "13/06/2017 - 13:26":

Very badly written clauses.

As written, one could argue that
- after the first year the rent is ONLY the increase as calculated by the formula, not the original plus the increase.
- If the tenant is not on housing benefit, then no rent increase is applicable (and from first point) no rent is payable.
- if tenant was married originally and became not married and hence became entitled to less housing benefit, then the rent should go down.

However, judges tend to reject such absurdities and try to determine what the parties actually meant. So in this case probably "new rent = original rent increased by the same proportion as housing benefit has increased since the start of the tenancy".

So, as suggested above, you need to determine
a) housing benefit entitlement at start of tenancy.
b) housing benefit entitlement now.
calculate b/a and multiply that by original rent.

I think you cannot use inflation, as housing benefit may have changed by more or less than inflation (as suggested by a post above).

Ian Narbeth

17:20 PM, 3rd July 2017
About 4 years ago

Reply to the comment left by "Michael Barnes" at "14/06/2017 - 10:05":

I agree Michael. For what is meant to be a long-term contracting the clause:
"3.8 On each of the Review Dates the Rent (being the rent payable per calendar month) shall be adjusted to be equal to any percentage increase, as measured on an annual basis from the date of the commencement of the Tenant’s occupation of the Property under the terms of this Lease, in the sum of any housing benefit or equivalent state or other benefit which is receivable by the Tenant in respect of his occupation of the Property." is truly appalling and some of the worst drafting I have seen in over 30 years.

It is illiterate and as you note, on a literal reading, the monthly rent is to equal a percentage increase. If one of my trainees had produced this load of cobblers I would have sent him or her off to re-do it. Still I suppose there was a low solicitor's fee for drafting this pile of *oo!

Gareth, it might be worth seeing if the tenant will agree to clarify the drafting by a deed of variation/rectification. Unfortunately it will cost and if the tenant has a mortgagee their fee will need to be paid as well.

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