The Month That Made a £25,000 Difference in a Service Charge Cap

When it comes to lease renewals, even the smallest detail can have a big financial impact.  In this case study, Gary Roper shares how the team helped a client uncover a subtle – but costly – error in their landlord’s service charge calculations.  What looked like a minor difference of just one month in the Retail Price Index (RPI) turned out to be the key to saving our client thousands of pounds every year for the next decade.

While renewing their lease on a property with a capped service charge, a client asked us to confirm the correct capped liability set out in the lease terms.

The cap itself was fairly standard:  a base figure with annual increases linked to the Retail Price Index (RPI).  Specifically, the lease stated that the RPI figure from the start of the financial year (April) should be compared to the RPI figure from the start of the lease (also April).  We calculated the correct cap based on this, but the client later told us that the landlord’s managing agent had quoted a higher figure.

Once we reviewed the landlord’s calculations, we spotted the issue:  they had used the RPI figure from March instead of April, despite the lease clearly stating that April figures should be used.

So, does a single month really make a difference?   In this case, absolutely – especially since the lease began during one of the most volatile inflationary periods in recent history:  2022.

April 2022 saw the largest single-month increase in inflation since the RPI index began in 1987, jumping by 3.43%.  By correctly using April as the base month instead of March, our client avoided that extra month’s inflation being factored into their service charge cap.   The result?   A £2,500 reduction in the cap for the new lease – saving them at least that amount every year for the next 10 years.

This case is a great example of why it’s worth negotiating a cap on your service charge liabilities – and why having Assure review your lease renewal terms can make a real financial difference.  At Assure, we don’t just spot opportunities, we secure lasting savings and protect your position for the future – giving you complete confidence that your costs are under control.

If you are an occupier looking to gain control over your occupancy costs, fill out the contact form below, and one of our specialists will be in touch.