Is this landlord’s interpretation of inflation in a rent review clause correct?

This is a question to the blog clinic from Karen who is a tenant.

Our tenancy agreement allows for an inflationary increase in the rent with a 2% collar and 5% cap effective from 8 June 2016 (the expiry of the first 12 month period).

The landlord has calculated it as follows: current rent £2,860.00 and according to Google, inflation was 100.6/100.2 = 3.99% over that period. This means the rent should increase to £2,974. He has also asked for 6 months back rent to be paid.Two questions: source for inflation should be official UK

Two questions:

1. The source for inflation should be official UK Government shouldn’t it?
2. And second, can he impose back rent given that he didn’t inform us of the increase until 20 December?

Answer

To answer this question properly (which was actually submitted to the blog clinic in January) I would need to see the wording of the clause in question.

The general rules with rent review clauses is that to increase the rent the landlord has to do what is required in the clause, exactly. Unless the clause is deemed to be ‘unfair’ in which case it is unenforceable.

Now normally in rent review clauses they should refer to a specific identifiable index or some other means of calculation. For example the retail price index. A vague reference to ‘inflation’ may not be enforceable, if there are several ‘sources’ of information which differ. It may make the clause void for uncertainty.

Then rent review clauses usually have a notification element where the landlord is required to notify you when the rent increase is due to start. An exception to this would be if the rent increase was clearly stated – ie the amount and the date.

For example, if the clause said something like ‘the tenants rent will increase to £1500 with effect from 16 June 2016.’

Now it looks like your clause is a bit of a hybrid. It gives an exact date for the rent increase to start but the method of calculating the increase is not certain.

Grounds for challenge

I think there is scope to challenge this clause as it is not clear. There is also the fact that the landlord failed to notify you of his interpretation of the increased rent for a period of six months.

One solution to this is to refuse to pay the increase stating that the clause is either void for uncertainty or unenforceable under the Unfair Terms in Consumer rules (now in the Consumer Rights Act 2015).

If the landlord deducts the extra rent he considers he is entitled to from you deposit at the end of the tenancy, you could refer this to adjudication and ask the adjudicator to consider and rule on whether the clause is enforceable or not.

However (subject to the precise wording of the clause), if the clause was valid and the landlord’s interpretation of ‘inflation’ correct, then I think it is probably arguable that the increase was effective from 8 June – in which case you are liable for the extra money from that date.

Finally – a warning

When taking any sort of hostile action against a landlord where you have an assured shorthold tenancy, you need to take into account that landlords always have the option of serving a section 21 notice on you and requiring you to leave after the end of your fixed term (assuming they have complied with the requirements for section 21 which we are not discussing here).

So if you want to stay in the property long term you may want to consider trying to reach an agreement with your landlord or, if this is not possible, paying the rent if it is affordable for you.