Rent Review for a small motel

[Jerry2012]

Hi everyone,

I'm the tenant of the small motel and the landlord has proposed rent review.
The landlord did not increase the rent past 4 years and the proposal is 4% increase.

The landlord says "Inflation over the last 4 year period has run at over 11%" so this increase should be fair.

I'm not sure where the landlord get 11% from but from what I can see on RBNZ calculator that CPI Housing is about 3%

I assume commercial rent might be different so I would like to get your general view on this proposal.

Thanks in advance.

[charlotte30]

Dear Jerry 2012

Your landlord will be talking about a per annum basis times 4 years. You are looking at one year. It is normal for rent increases to be based on CPI for commercial. Look at your lease document it will tell you when the rent reviews are to occur and how the it is to be calculated..
Cheers
Charlotte30

[Jerry2012]

Dear Charlotte30

Thank you for the reply.
I understand the rent might increase based on CPI and the lease document does say that the increase is based on CPI.

I am not an economist but CPI consist of everything including food where inflation over 4 years are 13% according to RBNZ inflation calculator.
Whereas if you look at inflation figure for housing, 3% is what I get.

I'm thinking to challenge the landlord proposal but I would like to base on a legit reason.

Thank you

[Davo36]

Mate, you're using 2 different things, CPI and housing inflation.

Your lease is based on CPI and has nothing whatsoever to do with housing inflation.

Count yourself lucky the landlord hasn't increased the rent to CPI every year.

4% this year sounds really reasonable to me.

[Jerry2012]

I see. I guess I have to do more homework

Thank you for your comment.

[Ivan McIntosh]

What is the exact text of your rent review calculation clause? Doesn't really matter what housing increases are if the contract says CPI.

If it is based on CPI movement over the time since the least review, 4% sounds pretty reasonable.

[Aston]

I have a similar agreement and I review annually with the default being CPI. Over the past four years I have settled at CPI but I am currently going through a full review. I will end up settling at something around 15%. The tenants will not be happy with this, but these are the conditions in the contract.

I'm not sure of the details of your contract but It seems to me that you landlord is a reasonable person and maybe you should jump at the 4% before he changes his mind.

[Jerry2012]

It is great to hear general thoughts. Looks like I'd have to jump on to this proposal.
As a tenant, it will be no problem if the occupancy goes up as well.
It looks like NZ economy is trying to recover so hopefully I can pay the increase from extra business.

Thank you all for your help. I'm just glad I found out about this forum.

[Maccachic]

You can always try to negotiate.