Understanding how my ground rent is calculated

anselld

Cfrankie32 wrote: »

Okay I've just done the sums (I think) and it still doesn't add up. Unless are you supposed to add the product of the calculation onto the rent you already pay?

So for instance I pay £230 rent now.
At my next review (say 10% increase in RPI over 5 years) I've had a look and the RPI value should roughly be 310. The RPI for Jan 17 (Base RPI month) is 265.5

So my sums are

(Rent x RPI at rent review)÷ Base RPI Month

230 x 310 ÷ 265.5 = £268
Is this the new GR charge or do I now have to add that to the original rent i was paying? Which would make it £498

That is the only way I can see that the GR would be £1000 in 10 years

I was under the impression that £268 would be the new figure? Please correct me if I'm wrong?! This is quite confusing.

£268 would be correct in that example.
RPI indexation is very standard and straightforward. If the wording is defective that is indeed a matter for the solicitor, but there is only one answer as far as the maths is concerned.

Tom99

Cfrankie32 wrote: »

[FONT=Verdana, sans-serif]The indexed rent for a review date shall be determined by multiplying the rent by the index value of the RPI for the month two months before the month in which that Review date falls or the Base Value whichever is the greater, then dividing the product by the index value of the RPI of the Base RPI month. [/FONT]
[FONT=Verdana, sans-serif]Base RPI month: Jan 17

Base value: Means the figure which is created by the addition of 100 to the index value of the RPI for the previous Review date ( if no Review date the date of the lease)[/FONT]

[FONT=Verdana, sans-serif]So assuming RPI index is 310 at review date your calculation should be:

[/FONT] [FONT=Verdana, sans-serif]Base RPI as at Jan 2017 = 265.5[/FONT]
[FONT=Verdana, sans-serif]Base Value = 265.5 + 100 = 365.5

[/FONT] [FONT=Verdana, sans-serif]So Base Value is higher than RPI at review date:

[/FONT] [FONT=Verdana, sans-serif]Rent at year 5 = £230 x 365.5 / 265.5 = £317 pa

[/FONT] [FONT=Verdana, sans-serif]ie there is a built in min increase at the 1st review of 37.7%. This %age will drop slightly at subsequent reviews as +100 becomes a smaller percentage. [/FONT]

Cfrankie32

This helps thank you

London54

I am also buying a new apartment at the moment. I have a similar clause in my lease and waiting for my solicitor to provide me with a worked example as well as the source of the figures for the example.


Will let you know the response I get. Would be interested to hear if you find anything with this that would result in you not proceeding with the purchase.


I've been reading some horror stories online about ground rents growing at such a rate that they make the property unaffordable and unsaleable after about 50 years (probably when people like you and I are hoping to retire!)