Shared ownership - huge rent increase

OrlaJ

My shared ownership property recently imposed a 15% rent increase - wondering if anyone else has been through similar or is able to help. 

When I bought my share (bought as a re-sale) the guidance and sales documents said there was an annual rent increase of RPI + 0.5% per year. However I received a letter saying the housing association had made a 'historical miscalculation' and would be making a larger than usual increase to rectify their mistake. RPI + 0.5% had been the basis of all recent rent increases for a number of years, this is as per the government guidance on shared ownership. However, an issue arose because the lease actually stated RPI + 1%. At the time of the purchase I did discuss this with my solicitor and he'd informed me they had to go off the guidance documents of RPI + 0.5%. Anyway, the housing association obviously realised the discrepancy and saw that they could make some extra cash by historically applying RPI + 1% to give a new rate that amounted to a 15% rent increase.

I've complained to the highest channel within the HA, surprise surprise that went nowhere. And after a long wait the housing ombudsman told me I probably had a case but they couldn't help, and that I should consider going through a first-tier tribunal. This is quite a cumbersome process, as such, I'd like to have more of an indication of success before entering into it. Or maybe your local MP should be able to help with matters such as this... 

Grateful of any insights. Thanks

princeofpounds

Do you mean the First Tier Tribunal?

OrlaJ

Oops yes, it was First Tier Tribunal*

rachel230

Might be easier to take your solicitor to task for incorrect advice.

princeofpounds

OK, I wasn't asking to be a pedant, I just wondered if this was something I'd never heard about before!

What you're asking about is quite a specific legal question, and a rare one at that, as it's not often that an SO landlord would miscalculate the rent. So a direct answer may be tough. I suspect that getting a professional legal opinion might be worthwhile, before deciding whether to go to tribunal. In the meantime, you should probably pay 'under protest' (i.e. notify them that you will be considering challenging the situation). 

It might be worth calling lease-advice.org - this is a government funded advice service on matters concerning leasehold, and they do also cover shared ownership to some extent. My suspicion however is that this may prove too niche for them. 

As for your legal situation itself, there are a couple of separate issues:

- If the lease stated RPI+1%, it really should have been RPI+1% in most normal circumstances. So one major question is what was, and what remains, the legal status of this 'government guidance'. Do you know where it came from and why the solicitor advised you this way? Hopefully he did not make a mistake. I would have been quite wary about expecting +0.5% when that was clearly not what was specified in the lease.

- Assuming that the escalation is now RPI+1%, what is the legal position on backdating those rent rise, or should it only apply going forward? This will partly depend on the language in the lease. I suspect it would enable backdating, but can't be sure. What is the clause? It will also depend on that issue of government guidance - if it truly did supersede the lease for a period then it may have implications for backdating the indexing.

princeofpounds

rachel230 said:

Might be easier to take your solicitor to task for incorrect advice.

It may be. But the advice may not have been incorrect at the time. And what evidence does the OP still have of this advice?

nnewtoarea

By historical, do they mean before you bought.

Lunchbox

The leases usually stipulate a maximum rent increase, not a mandated one. Definitely make an appointment to speak to the leasehold advisory service.

AdrianC

The difference between RPI + 0.5 and RPI + 1.0 is 15% of the total?

I find that hard to believe. That would seem to imply they've gone back 30yrs with this "correction".

Can you show some actual figures, please?

honeytrippers

Hi OrlaJ
how did you get on with your rent increase query?
Couple of things, that might be of interest to you....
www.lease-advice.org/faq/i-have-a-shared-ownership-lease-how-is-the-rent-of-the-share-owned-by-the-landlord-calculated/
My housing association actually charged 2.75% in 2008 (maybe 3% is the 2020 value) and then the RPI (+whatever) increase each year.
Here the RPI levels for each year....
swanlowpark.co.uk/retail-price-index
...not sure off the top of my head whether the increase is calculated, before or after the grounds maintenance fee is applied.
Regards,
Keith. 

honeytrippers

Hi OrlaJ
Probably best to use the ONS data for RPI ....

www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

My housing association tends to inform me of the increase in Feb (2020) for the start of the new tax year in April (2020), based on the RPI rate (+0.5%) in Sept the year before (2019 2.4%), which for me was 2.9%.
Regards,
Keith.