i have a 2005 commercial lease that had a cpi increase eff 5/2010 how do i calculate that?

In Property Management - Asked by Shirley J. - Sep 17, 2012
Report Abuse
Answer this Question

Answer(s)

TCI P.
Listing Administrator
Orange, CA

You would have to go back to the Consumer Price Index back for that date. I checked my records for May, 2010 and it was 1.8%. So you would take the rent they are paying and multiply by 1.8% and then add it to the rent the tenant would be paying for June 2010. Don't know if you can go back that far to adjust the rent. You would also need to send them a letter, telling them you are increasing their rent and what date it would be effective.

Sep 18, 2012
Report Abuse
TCI P.
Listing Administrator
Orange, CA

You would have to go back to the Consumer Price Index back for that date. I checked my records for May, 2010 and it was 1.8%. So you would take the rent they are paying and multiply by 1.8% and then add it to the rent the tenant would be paying for June 2010. Don't know if you can go back that far to adjust the rent. You would also need to send them a letter, telling them you are increasing their rent and what date it would be effective.

Sep 18, 2012
Report Abuse
Rob B.
Chandler, AZ

Shirley....
As a property manager for many years, I found that one of the essential things to have was an automatic reminder in my bookkeeping system for CPI and other increases in leases. One of the sins of property management, (whether self-managed or professionally managed) is failing to apply CPI increases when due. It is very difficult to go back and expect a tenant to be penalized. Particularly if you are going back many months.
However, if it were me and I caught this mistake, I would now write a letter to the tenant, informing him or her of your mistake and beginning with the following month's rental amount to collect the correct amount. Determination of the correct amount will be based precisely on how the COL clause is written in your lease. A comparison of the base year and the COL year is the key to it. For example do you have the right to compare the beginning of the lease in 2005 to May of 2010 and collect the difference? Or, can you only collect on a twelve month basis, from May 2009 to May 2010. What then happens after May 2010.
As mentioned you may not either legally or practically want to pursue collecting past payments, as this was your oversight. However, you should be able to begin to collect with a 30 day notice to the tenant all future increases due on the lease according to the indicated terms of your COL clause.
Please do not accept this as legal advice. All legal matters should be addressed by an attorney in your jurisdiction.
Onward and Upward!
Rob Baird
Rob@capratecommercial.com

Oct 1, 2012
Report Abuse
Robert H.
Broker/Agent
Metairie, LA

the real question is where do you find cpi data? it is produced by the bureau of labor statistics at http://www.bls.gov/cpi/#tables. create a spreadsheet with the cpi data in one column and your lease costs in another and create a third column to multiply the cost by the cpi. It makes a huge difference if you compound it monthly versus annually. I can help if you email me at my website.

Oct 13, 2012
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question