Ground rent 5yr RPI review - dispute on % calculated

ZoltarSpeaks

Hello - Anyone understand RPI and ground rent? If so, would welcome your advice / insights.

Every 5 years my ground rent is subject to an RPI review and I've just received a notice that it is to increase by 37.9%. From £250 to £344.75. 

I wanted to understand how they came to this figure so checked on 3 different online RPI calculators. All report a % increase for the period July 2018 to June 2023 of 33.62%. OK so this only works out to be a £10 difference but that could make all the difference in future reviews.

My question is: How is RPI calculated? Is it possible that they can come up with a different figure when it is linked to government published figures? 

I called the company that collects my ground rent and the woman was incredibly rude, refused to give me any information about who did the valuation for them and how it was calculated and suggested if I didn't like it I consult a solicitor. Which I thought was nice! 

Thanks 

user1977

Might depend on which months are used for the calculation. Can you quote the relevant clause in the lease?

ZoltarSpeaks

I'll have to dig the lease out so let me get back on that. But on the months, their letter specifically states their calculation is July 2018 to June 2023.

user1977

I agree with your calculations for those months - is it definitely RPI rather than some other index? You can always try responding with your working and see what they say.

ZoltarSpeaks

Thanks. Yes, I sent them my concerns and workings a couple of weeks ago. And called yesterday because they weren't responding. They said 'we go by the figures our valuers give us, not those of leaseholders', refused to give details of how they came to that figure or where it's from, and then promptly hung up. 

I've just dug out the lease. It says the Index = the index of retail prices published by government. It also says: 'The rent for any review period is to be the initial rent (£250) plus the amount which bears the same proportion to the initial rent as the increase bears to the base figure rounded up to the nearest £10.' (which clearly, if I'm understanding it correctly, they haven't complied with the last part - since they state the new ground rent is £344.75)

The 'Base figure is the index figure for the month preceding the commencement of the new term.' Trying to get my head around this sentence and if it impacts the calculation...

It does have clauses for how any dispute that arises out of rent reviews should be addressed. 

Agh legalese. What a horrible language! 

tetrarch

Hev you thought about checking with you nearby fellow leaseholders. There is power in numbers

Regards

Tet

user1977

ZoltarSpeaks said:

The 'Base figure is the index figure for the month preceding the commencement of the new term.' Trying to get my head around this sentence and if it impacts the calculation...

Commencement of the term would be the start date of the lease - what was that?

ZoltarSpeaks

tetrarch said:

Hev you thought about checking with you nearby fellow leaseholders. There is power in numbers

Regards

Tet

That's a really good idea. I suspect we all have different leases - the previous owner did a quick £500 renewal to add more years on, which put me onto RPI ground rent increases. But definitely worth finding out. 

saajan_12

ZoltarSpeaks said:

I've just dug out the lease. It says the Index = the index of retail prices published by government. It also says: 'The rent for any review period is to be the initial rent (£250) plus the amount which bears the same proportion to the initial rent as the increase bears to the base figure rounded up to the nearest £10.' (which clearly, if I'm understanding it correctly, they haven't complied with the last part - since they state the new ground rent is £344.75)

The 'Base figure is the index figure for the month preceding the commencement of the new term.' Trying to get my head around this sentence and if it impacts the calculation...

Please quote any clauses in full which mention how its calculated, as the above isn't sufficient to outline a calculation. It'll often mention a formula, observation dates, etc. 

eddddy

tetrarch said:

Hev you thought about checking with you nearby fellow leaseholders. There is power in numbers

ZoltarSpeaks said:

That's a really good idea. I suspect we all have different leases - the previous owner did a quick £500 renewal to add more years on, which put me onto RPI ground rent increases. But definitely worth finding out. 

Be very careful - I'm not sure there really is power in numbers. 

In particular, withholding your full ground rent could be very dangerous.

Your ground rent is over £250. If your property is outside London and you don't pay it for 3 months, your freeholder might have the mandatory right to repossess your flat - a court might not be able to refuse.


Even if you're within London and/or you (and other leaseholders) only withhold part of your ground rent, your freeholder is likely to:

• Send you reminder letters - and charge you a fee of £40+ per letter sent
• Instruct solicitors - and charge their fees to you, which could be a few hundred pounds
• Instruct debt collectors (with more fees) and/or start possession proceedings

TBH, there are laws you can use to dispute a service charge, but I can't see any law relating to disputing ground rent.

Maybe phone LEASE to see what they say: https://clients.lease-advice.org/#/


For the moment, in your position, I would..

• Pay the ground rent they are asking for before the due date (to avoid any fees)
• Tell them in writing that you dispute the amount, and you are paying under protest
• Ask in writing for details of the calculation that their valuer used

SXX

You might want to read up on Onerous ground rents.