RPI calculations for 10 year lease/ annual rent increases

anniem

Can someone check this for me please?

I am preparing a 10 year business lease with an annual increase in line with inflation and would like to check the following clause which I have taken from the previous lease (during which time the rent was never actually increased!):

The annual rent payable from 25 December 2010 (“the Review Date”) shall be the higher of the annual rent payable for the period immediately prior to such date ("the Existing Rent") and the annual rent calculated as follows:

£10,500 x RPI2/RPI1

Where A is the Existing Rent
RPI 1 is the Retail Prices Index for the month of December 2009 and
RPI 2 is the Retail Prices Index for the month of November 2010

I must be doing something wrong, because I seem to end up with the rent going down, not up!!!!

slackda

Risky trying to forecast 10 Years inflation....

But i think you need to swap your RPI2 and PRI1 around.

I.e PRI1/RPI2* £10,500

deanshepherd

No, the formula is correct RPI1/RPI2 will make the number smaller (providing RPI increased over the period).

Must be your calculator..!

anniem

This is actually the clause prepared by our solicitor and, when I tried it, I too thought it was the wrong way around!

We're not trying to forecast inflation for the next ten years; the clause is intended so that we can carry out an annual review each December and simply implement a rent increase.

slackda

Aha i see makes more sense now.


RPI Curre RPI Future
10500 150.00 154 1.026666667 10780


Dean is right :P, i just miss read the above.