Rent after Staircasing

iqbal.ha

Hi, 

  I have recently staircased my house bough on Part-Buy Part-Rent scheme. Just before staircasing they had reviewed the rent (normally happens on every year 1st of April according to the RPI) and accordingly increased the rent.

  After staircasing, as expected the rent came down due to increased share in my equity. And also in "Memorandum of Staircasing" the rent calculated is according to their share. The rent mentioned in "Memorandum of Staircasing" is £1589/month.

  But after a week they have sent another email where they mentioned the new rent (£1674) which is according to the RPI calculated in April. ie.
     Rent calculated according to their share + Rent review according to RPI,
    £1589 + £85 = £1674.

  My question is, can they add RPI related increase to the rent when we do staircasing? Or it should be accroding to the rent mentioned in "Memorandum of Staircasing"? Please let me know.Thanks in advance.

Regards

eddddy

The rent terms are probably explained in your lease - you need to see what they say.


But it just sounds like 2 events happened a week apart by coincidence.

Event 1 - you staircased, so your rent reduced to £1589

Then a week later, by coincidence...

Event 2 - your (annual?) rent review was due, which increased the rent from £1589 to £1674

Or do you think that's not the case?

iqbal.ha

Hi, thanks for the reply.

It is the other way around. 

Event 1 -  Annual rent review was due and happened in April 2022 and the rent increased according to RPI

Event 2 -  Staircasing completed on 27th May 2022 (in fact the staircasing application was ongoing during rent reveiw)

Regarding the rent terms, I will have look in the lease. 

Thanks again.

eddddy

iqbal.ha said:

Hi, thanks for the reply.

It is the other way around. 

Event 1 -  Annual rent review was due and happened in April 2022 and the rent increased according to RPI

Event 2 -  Staircasing completed on 27th May 2022 (in fact the staircasing application was ongoing during rent reveiw)

Regarding the rent terms, I will have look in the lease. 

Maybe somebody has made a mistake.

If you like, you can provide more information, and people here can check to see if the numbers look correct.

The information required is probably:

• The percentage you owned before staircasing in April 2022
• The percentage you owned after staircasing in April 2022
• The rent you paid before April 2022
• (You've already mentioned the rent you paid after April 2022)
• (You've already mentioned that your RPI rent increase was due in May - did it say it was a 5.35% increase?)

iqbal.ha

eddddy said:

iqbal.ha said:

Hi, thanks for the reply.

It is the other way around. 

Event 1 -  Annual rent review was due and happened in April 2022 and the rent increased according to RPI

Event 2 -  Staircasing completed on 27th May 2022 (in fact the staircasing application was ongoing during rent reveiw)

Regarding the rent terms, I will have look in the lease. 

Maybe somebody has made a mistake.

If you like, you can provide more information, and people here can check to see if the numbers look correct.

The information required is probably:

• The percentage you owned before staircasing in April 2022
• The percentage you owned after staircasing in April 2022
• The rent you paid before April 2022
• (You've already mentioned the rent you paid after April 2022)
• (You've already mentioned that your RPI rent increase was due in May - did it say it was a 5.35% increase?)

H,

  Thanks again for the reply.

• The percentage I owned before staircasing in May 2022     --> 25%
• The percentage you owned after staircasing in April 2022   --> 40% (I have bought 15%)
• The rent you paid before April 2022   --> £1986
• (You've already mentioned the rent you paid after April 2022) -->  £1674 (including RPI)
• (You've already mentioned that your RPI rent increase was due in May - did it say it was a 5.35% increase?) --> You are right. It was 5.36%

  When I looked at the Lease, the following part is from Rent Review section:

1                            Rent review

 

The rent will be reviewed periodically at the times set out in the lease. Typically, the rent will be reviewed every year. The reviewed rent will be increased in line with any proportionate increases in the retail prices index (RPI).

The rent will be reviewed on an ‘upwards only’ basis. This means that the level of rent will not go down when it is reviewed. However, any increase in the rent will be capped at a figure representing the RPI increase plus 0.5%. This means that where the RPI is zero or negative the most the rent can increase by is 0.5%.

 

A worked example demonstrating how the rent is recalculated at review is set out in

Appendix 2 of the lease.

And the Staircasing portion is as follows:

Schedule 5

Staircasing

Part 1

Staircasing Provisions

1. 

(a)           At any time or times during the Term the Leaseholder may serve notice in writing on the Landlord stating the Portioned Percentage he proposes to acquire.  The provisions of this Schedule 5 (Staircasing ) shall also be exercisable by any mortgagee of the Leaseholder of whom the Landlord has received proper notice pursuant to Clause 3.21 (Register disposals)).

(b)           The Landlord shall apply to the Valuer to determine the Market Value as at the date of service of the Leaseholder’s notice served pursuant to paragraph 1(a) (upon which the Adjusted Market Value and the price of acquisition will be based) within 14 days of receipt of the Leaseholder’s notice (or, if later, within 14 days of the Valuer’s appointment) and shall notify the Leaseholder of the amount of the Valuer’s determination and the resulting Adjusted Market Value in writing within 7 days of receipt of the said determination.

(c)           At any time within 3 months of the Valuer’s determination the Leaseholder may pay for a Portioned Percentage in accordance with the provisions of paragraph 1(d).

(d)           The Leaseholder may pay for a Portioned Percentage by paying to the Landlord a sum equal to that Portioned Percentage of Adjusted Market Value (as agreed or determined under this Schedule 5 (Staircasing ))plus any unpaid sums under paragraph 1(e) and as from the date of such payment (a) the Portioned Percentage so acquired shall form part of the Acquired Percentage and (b) the Specified Rent payable under this Lease shall be a sum equal to the Unacquired Percentage of the Gross Rent.

(e)           On completion of the payment for a Portioned Percentage in addition to the sum or the price payable for the Portioned Percentage the Leaseholder shall pay any arrears of rent and any other sums due to the Landlord under this Lease including any unpaid costs under paragraph 2.  The Landlord and the Leaseholder shall, save as provided in paragraph 2 pay their own costs and expenses in connection with such payment or purchase.

(f)            Whenever the Leaseholder completes the payment for a Portioned Percentage the Landlord and the Leaseholder shall forthwith execute and deliver to the other (to be attached to the original and counterpart of this Lease) a memorandum substantially in the form set out in Appendix 1 specifying the Portioned Percentage paid for and the Specified Rent then payable.

(g)           If the provisions of this Schedule 5 (Staircasing) are exercised by any mortgagee under paragraph 1(a) all reference to the “Adjusted Market Value” shall be deemed to be reference to the “Market Value” and then provided that the Premises are being sold by the mortgagee on an arm's length basis at the best price reasonably obtainable at the time of sale:

(i)         the Market Value shall be deemed to be the price at which the Premises are being sold by the mortgagee on the assumption that the Unacquired Percentage is nil;

(ii)         the relevant Portioned Percentage shall be calculated on the basis of that deemed Market Value; and

(iii)          if so requested by the mortgagee, the Landlord shall co-operate with the mortgagee to ensure that there occurs simultaneously (A) the payment to the Landlord of the relevant Portioned Percentage under paragraph 1(d), (B) delivery by the Landlord to the mortgagee of the memorandum under paragraph 1(f), and (C) completion of the sale of the Premises by the mortgagee. 

2.

(a)           At any time the Leaseholder shall have the right on giving notice to the Landlord to acquire the freehold of the Premises for no charge and by a transfer of whole of the Landlord’s freehold title provided that such notice shall not take effect (i) before the Acquired Percentage has become 100% and (ii) until all sums payable to the Landlord pursuant to paragraph 1 have been paid.

(b)           The freehold of the Premises shall be transferred by the Landlord to the Leaseholder as soon as practicable following the date of the Leaseholder’s notice served pursuant to paragraph 2(a). For the purposes of the transfer of the freehold to the Leaseholder the Landlord shall supply to the Leaseholder copies of the subsisting entries in the register of its title and of the title plan and of any document referred to, but not set out, in the registers of title.

3.            The costs of any determination by the Valuer pursuant to the provisions of this Schedule 5 (Staircasing ) shall be paid by the Leaseholder to the Landlord on demand.

4.            The parties agree that the decision of the Valuer shall be final and binding on the parties to this Lease.

 

eddddy

iqbal.ha said:

  Thanks again for the reply.

• The percentage I owned before staircasing in May 2022     --> 25%
• The percentage you owned after staircasing in April 2022   --> 40% (I have bought 15%)
• The rent you paid before April 2022   --> £1986
• (You've already mentioned the rent you paid after April 2022) -->  £1674 (including RPI)
• (You've already mentioned that your RPI rent increase was due in May - did it say it was a 5.35% increase?) --> You are right. It was 5.36%

The short answer is that £1674 seems to be the correct rent.

But it seems that somebody made a mistake when they wrote the "Memorandum of Staircasing", and wrote £1589 (they forgot about the RPI increase that had just happened).


I don't know if the "Memorandum of Staircasing" is part of a legal contract - and therefore you can insist that you only pay £1589.

(Maybe somebody else will come along with more knowledge about that.)





Anyway, here are the background calculations:

Before the rent review in April 2022, the rent was as follows:

100% of rent = £2648
75% of rent (i.e. for 25% ownership) = £1986
60% of rent (i.e. for 40% ownership) = £1589


After the rent review in April 2022, the rent increased by 5.36%, so the rent should be as follows:

100% of rent = £2790
75% of rent (i.e. for 25% ownership) = £2092
60% of rent (i.e. for 40% ownership) = £1674

iqbal.ha

Hi,

  Thanks for your response. 

   Your calculations are correct. 

    Even I am not sure whether "Memorandum of Staircasing"  is legally binding. If yes, then I can insist on them that I can only pay what is mentioned in "Memorandum of Staircasing" .

   Can someone shed some light on this please? Thanks.

    Thanks in advance.

Regads,