RPI Rent reviews – Tenant Considerations

RPI Rent Reviews

The retail price index (RPI) is a tracker which is used to measure inflation. In recent years the RPI has remained relatively steady; however, since 2022, there has been a sharp rise in inflation both in the UK and around the world, and RPI figures have increased significantly.

Some leases use RPI increases as a basis for rent reviews, and in the current financial climate, this could cause rents to increase dramatically. Tenants with RPI-linked rent reviews may need to reassess their position in light of recent developments.  

If the terms of a lease are still being negotiated, the tenant should consider:

• including a “cap” on the RPI increase to manage any sudden spikes in RPI figures and create certainty as to the maximum future rents payable during the term of the lease.
• negotiating other alternative rent review mechanisms such as open market rent or fixed rent increases if the projected rent figures are likely to be more reasonable.

For existing leases, the tenant should consider:

• negotiating a variation to the lease to substitute the rent review mechanism. This will, of course, be subject to the Landlord’s agreement, and the Landlord may require the tenant to provide consideration in return for the variation, such as the deletion of a break clause.
• negotiating the variation of a lease to insert a rent review cap. Again, this will be subject to the Landlord’s agreement, and the Landlord may insist on a rent review “collar” i.e. a minimum rent increase or other consideration in exchange.    
• exercising a break right to terminate the lease before the RPI-linked rent review comes into effect.

Overall, RPI is becoming a less commonly used index (with CPI being preferred), and it is likely that the number of leases with RPI-linked rent reviews will decline in the future.