ANNUAL RENT REVIEWS
ANNUAL RENT REVIEWS
All leases commenced on the 1st January 2019 for a period of 125 Years. This means that on the 1st of January in each successive year the remaining lease reduces by 1 year.
In summary –
• January 1st 2019 – 125 Year Lease Remaining
• January 1st 2020 – 124 Year Lease Remaining
• January 1st 2021 – 123 Year Lease Remaining
Of course, a Lodge and Lease purchased mid-way through a year will benefit from the remaining months of that year and the full quota of years from the following 1st January.
The initial ‘Ground Rent’ applicable to 2019 was £2,750.00 + Vat, the Vat applicable in 2019 was 20%, thus the annual rent was £3,300.00
The lease provides the formula for the increase in Ground Rent. Ground is increased yearly on the anniversary of the lease; in this regard the anniversary is the 1st January in each year.
The Retail Price Index (RPI) is the mechanism in which the increase is determined. If RPI increases there is likely to be an increase in Ground Rent Cost, If RPI decreases the Lease Provides for an Upward only Ground Rent Review, this means that the result of a reduction in RPI will result in the Ground Rent remaining as per the previous year.
The Ground Rent Review (Annual Rent Review) is detailed within the lease as follows –
A x B
C
This translates to –
A = Initial Rent
B = Index Figure for the month immediately before the relevant review date
C = Base Figure
In relation to calculating the rent this equates to –
A = The initial rent was £2,750.00
B = The RPI Index Figure for December 2019 was 291.9
C = The Base Figure (The Index Figure for Dec 2018 as documented in the Lease) was 285.6
The 2020 Annual Rent is established as £2750 (ex vat) x Dec 2019 RPI (291.9) / Base Figure (Dec 2018 285.6) which calculates to £2810.66 + Vat
Vat Is added after the established Rent as the rate of Vat may change over the lease length. Vat applicable to 2020 is set at 20%, thus the Annual Rent inclusive of Vat for 2020 is established as £3,372.79
All future rent reviews will be concluded using the same method.
• The Initial Rent
• The RPI Index Figure for, the December immediately prior to the review
• The Base Figure
It should be noted that the index figure for the December Prior to the review date is only published midway through the January review month. Due to this it is envisaged that the annual rent will be invoiced and payable towards the middle of each January.
