Common use of Worked Example Clause in Contracts

Worked Example. The notice set out below would have been given in relation to a rent review in November 2012 in the following circumstances: The Lease had Rent Review Dates on 30 November in 2011 and 2012; As at November 2012, the Leaseholder’s share in the Premises was 45%; The Gross Rent in November 2011 had been £100 per month (based on the RPI in September 2011), and so the actual rent payable would have been £55 per month (being 55% of £100). The RPI was 237.9 in September 2011, and 244.2 in September 2012. Key Information for Shared Owners This note is intended as a brief guide for Leaseholders (i.e., shared owners) of the key provisions of the Shared Ownership Lease. How does Shared Ownership Work? Under a shared ownership lease, the Leaseholder buys a ‘share’ of the property and pays rent on the remaining share of the property (which remains in the ownership of the Landlord). The Leaseholder can buy further shares in the property (up to the Maximum Percentage in Protected Areas) at the market value of those shares at the time of purchase. Buying further shares is referred to as ‘staircasing’. Normally, when the Leaseholder owns 100%, he or she can acquire the freehold in the property for no charge, but that does not apply to properties in Protected Areas. As the Leaseholder buys further shares, the rent will be reduced proportionately to reflect the fact that the Landlord’s interest in the property has reduced. Standard Lease Obligations Although initially the property is not owned outright, the Leaseholder does have the normal responsibilities of a full owner. This means, for example, that the Leaseholder will be obliged to pay 100% of the outgoings relating to the property and to keep the property in good and substantial repair and condition. The lease also contains other ‘standard’ obligations on the Leaseholder. For example, the Leaseholder will: if applicable, need to contribute towards the costs incurred by the Landlord in providing services; need to seek the Landlord’s consent before making certain alterations; and if applicable, comply with regulations relating to the management of the estate of which the property forms part. Rent Review The rent will be reviewed periodically at the times set out in the lease. Typically, the rent will be reviewed every year. The reviewed rent will be increased in line with any proportionate increases in the retail prices index (RPI). The rent will be reviewed on an ‘upwards only’ basis. This means that the level of rent will not go down when it is reviewed. However, any increase in the rent will be capped at a figure representing the RPI increase plus 0.5%. This means that where the RPI is zero or negative the most the rent can increase by is 0.5%.

Worked Example. The notice set out below would have been given in relation to a rent review in November 2012 in the following circumstances: The Lease had Rent Review Dates on 30 November in 2011 and 2012; As at November 2012, the Leaseholder’s share in the Premises was 45%; The Gross Rent in November 2011 had been £100 per month (based on the RPI in September 2011), and so the actual rent payable would have been £55 per month (being 55% of £100). The RPI was 237.9 in September 2011, and 244.2 in September 2012. The reviewed Gross Rent as at [30 November 2012] is therefore [£103.15] per month (being (£100 x ) + 0.005) Key Information for Shared Owners Restart Numbering Applied This note is intended as a brief guide for Leaseholders (i.e., i.e. shared owners) of the key provisions of the Shared Ownership Lease. How does Shared Ownership Work? Under a shared ownership lease, the Leaseholder buys a ‘share’ of the property and pays rent on the remaining share of the property (which remains in the ownership of the Landlord). The Leaseholder can buy further shares in the property (up to the Maximum Percentage in Protected Areas) at the market value of those shares at the time of purchase. Buying further shares is referred to as ‘staircasing’. Normally, when the Leaseholder owns 100%, he or she can acquire the freehold in the property for no charge, but that does not apply to properties in Protected Areas. As the Leaseholder buys further shares, the rent will be reduced proportionately to reflect the fact that the Landlord’s interest in the property has reduced. Standard Lease Obligations Although initially the property is not owned outright, the Leaseholder does have the normal responsibilities of a full owner. This means, for example, that the Leaseholder will be obliged to pay 100% of the outgoings relating to the property and to keep the property in good and substantial repair and condition. The lease also contains other ‘standard’ obligations on the Leaseholder. For example, the Leaseholder will: if applicable, need to contribute towards the costs incurred by the Landlord in providing servicesservices (sometimes known as service charges); need to seek the Landlord’s consent before making certain alterations; and if applicable, comply with regulations relating to the management of the building or the estate of which the property forms part. Rent Review The rent will be reviewed periodically at the times set out in the lease. Typically, the rent will be reviewed every year. The reviewed rent will be increased in line with any proportionate increases in the retail prices index (RPI). The rent will be reviewed on an ‘upwards only’ basis. This means that the level of rent will not go down when it is reviewed. However, any increase in the rent will be capped at a figure representing the RPI increase plus 0.5%. This means that where the RPI is zero or negative the most the rent can increase by is 0.5%.