RPI: an index in decline? Revisions to the RPI Index and Consequences for Landlords, Tenants and Investors

The RPI is commonly used as a statistic from which figures in leases including, but not limited to, service charge caps and ground rents, are periodically revised. It is reported that the RPI will soon undergo a change in how it is compiled. Although there is an ongoing consultation between the Government and the UK Statistics Authority (UKSA), the UKSA has indicated that it is inclined to bring the methods and data sources from the Consumer Prices Index including occupiers’ housing costs (CPIH) into its compilation of the RPI index. The introduction of the new data source and methods to the RPI will see its annual measured rate of inflation be lower, on average, by 1% point per annum.

Landlords and investors have expressed concerns about the adverse impact on RPI, with projected increases in figures in leases linked to RPI now in need of downwards revision. However, existing RPI linked provisions in leases often do contemplate changes to the RPI’s methods and data sources and it will be important for landlords to check their lease and consider if steps can be taken to protect their position. For new drafting, references to RPI may at times be replaced with CPI (plus a figure) in an effort to create an equivalence to the current RPI. Drafters should give careful consideration to the use of alternative formulae to RPI and the long term financial consequences for both landlords and tenants.

In light of the pandemic, the consultation period has been extended to 21 August 2020. 

Article written by: Joshua Felberg

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