Ground rents linked to RPI (Retail Price Index) increase annually with inflation. This can lead to high future payments. Statutory lease extensions reduce ground rent to a peppercorn (zero), removing this issue permanently. We have dealt with hundreds of cases with onerous ground rent provisions with a solid track record of achieving fair settlements – we are well placed to assist in these type of cases.
Ground rent linked to the Retail Prices Index (RPI) can seem like a fair and predictable arrangement — after all, it tracks inflation. But in reality, RPI-linked clauses can lead to significant increases in your ground rent over time, often well beyond what leaseholders anticipate.
In this guide, we explain how RPI-linked ground rent works, how increases are calculated, and how a statutory lease extension can eliminate the clause altogether. If you’re planning to sell, remortgage, or secure long-term affordability, this information is essential.
What Is RPI and Why Is It Used?
The Retail Prices Index (RPI) is a measure of inflation that tracks changes in the price of a basket of goods and services over time. It includes housing costs such as mortgage interest payments.
RPI is commonly used in older lease agreements to calculate ground rent increases every 5, 10, or 15 years. At the specified interval, your rent is adjusted in line with the percentage change in RPI.
How Are RPI Increases Calculated?
Here’s a simplified example:
- Ground rent: £250 per year
- Increase every 10 years
- RPI at lease start (Year 0): 200
- RPI at Year 10: 280
New ground rent = 250 × (280 / 200) = £350
That’s a 40% increase — and every decade, the calculation compounds.
Example Projection:
| Year | RPI Index | Annual Rent |
| 0 | 200 | £250 |
| 10 | 280 | £350 |
| 20 | 390 | £487.50 |
| 30 | 500 | £625 |
Is RPI Still in Use?
Yes, although RPI is considered outdated and has been largely replaced by the Consumer Prices Index (CPI) for many official purposes. However, many existing leases still contain RPI-linked clauses.
RPI tends to run higher than CPI — meaning ground rent increases can outpace general inflation.
What Are the Risks of RPI-Linked Ground Rent?
- Unpredictable Increases: Economic conditions affect inflation, making it difficult to budget for future rent levels.
- Compounding Growth: Increases based on previous increases lead to exponential rises.
- Mortgage Problems: Lenders are increasingly wary of escalating ground rent, especially if RPI-linked.
- Reduced Property Value: Buyers may offer less for a lease with unpredictable rent liability.
How Can I Reduce or Remove RPI-Linked Rent?
The safest and most effective way to eliminate RPI escalation is through a statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993.
Statutory Extension Benefits:
- Adds 90 years to the lease
- Reduces ground rent to a peppercorn (i.e., zero)
- Removes all escalation clauses, including RPI-linked ones
- Improves mortgageability and resale value
Informal Lease Extensions: Be Cautious
Some freeholders offer informal extensions with what appear to be attractive terms — but may retain or substitute the RPI-linked clause.
For example:
- Doubling ground rent replaced with RPI-linkage
- Reduced term increase but with escalating rent
Always read the fine print. A statutory lease extension is the only guaranteed way to remove the clause.
What Happens If I Sell with an RPI Clause?
If your lease has an RPI clause:
- Buyers may request a price reduction
- Mortgage lenders might refuse to lend
- You may have to start the lease extension process before sale
Alternatively, serve a Section 42 notice and assign it to the buyer — this allows them to extend after purchase.
FAQs
How often does the ground rent increase?
Typically every 5, 10, or 15 years — check your lease.
Can I negotiate the clause out?
Possibly via deed of variation — but freeholders rarely agree unless incentivised.
Is RPI likely to increase a lot?
RPI fluctuates — but even modest average inflation (3–4% annually) can double your rent in 20–25 years.
Summary: How to Deal with RPI-Linked Ground Rent
| Concern | Solution |
| RPI clause in lease | ✅ Statutory lease extension |
| Selling with RPI rent | ✅ Serve and assign Section 42 notice |
| Lender issues | ✅ Extend lease to zero rent |
| Rising cost concerns | ✅ Remove clause legally, don’t just insure |
Get Help Reducing or Removing Escalating Ground Rent
At Extension.Lease, we’ve helped leaseholders:
- Identify problematic ground rent clauses
- Calculate projected increases
- Eliminate RPI clauses via statutory lease extensions
