R.P.I Provision???

[SmokinV8]

My Landlord has just offered me a change to the terms of my lease agreement where upon I currently pay an annual sum and then an additional sum based on turnover. The turnover clause is to be removed and a new fixed rate with a RPI provision instead. What does RPI stand for? I know Im being thick, I just cant figure it!

[BoxheadTim]

Probably Retail Price Index, aka a measure of inflation.

[Eric Mc]

Retail Price Index - one of the methods used for assessing inflation.

[SmokinV8]

Ok, thanks that helps!

[Piglet]

I hope he's making it worth your while to give up your turnover rent?

Without teaching you to suck eggs, at least with turnover if you're not trading well you don't pay as much to your LL. Practically that helps you, it also gives the LL some focus on helping you to trade (if that's relevant - it is in a shopping centre environment).

With an RPI increase, you pay based on RPI and there is a difference between RPI and the now often used measure of CPI - you might want to google the difference and make sure you are happy.

Is it retail premises? If so my LL clients are going towards turnover only rents in this market as its the only way they can get tenants.

[SmokinV8]

It is retail premises on a garden centre site with my own building. Im quite pleased to be losing the turnover rent clause as this was costing me an additional £24k a year, and in the current climate prices keep going up and hence pushing my turnover up and yet no more margin/profit for me.
Also in the current climate I should be able to "bash out" a better rent agreement because there are now quite a few empty properties around with landlords looking to fill them at more affordable prices.

Edited by SmokinV8 on Friday 23 January 12:21

[Piglet]

Your turnover provisons should carve out "cost of sales" from the calculation?

It's a very good time to be a tenant, it might be worth talking to a local agent to get some steer on what the deals are locally before you agree Heads of Terms.

[cardigankid]

He is lucky to have a tenant. It's your call, I would say. He wants to insulate himself from possible inflation, and if you are bullish on your turnover, you may feel like taking the risk. But you would be signing up to an entirely unknown sum of money.

[BigAlinEmbra]

Be wary of RPI, as it probably won't reflect his costs (as mortgages fall), better off agreeing a fixed percentage that you're both happy with.