The spreadsheet that gets rebuilt every review
An index-linked review ought to be the easy kind. No valuer, no comparables, just a published index and a formula. In practice someone opens last time's spreadsheet, copies the tab, changes the dates and types in the new index figure. Then a tenant's agent writes back to say the base month is wrong, or the cap should have been applied annually rather than across the whole period, and the landlord has to issue a corrected demand.
Three buildings in, you have leases on RPI, leases on CPI, some with a collar and a cap, some compounded yearly, and one that reverts to open market if the index is rebased. The person who understood the older formulas has left.
Where the sums go wrong
The index is not the hard part. The lease wording is. Each lease sets its own base date, its own review date, how the index months are chosen, whether the cap is annual or aggregate and what happens if the index changes its reference base. Those rules sit in the lease and are reinterpreted every time.
| Lease detail | What goes wrong |
|---|---|
| Base month | Taken from the lease start instead of the month the lease specifies |
| Index choice | RPI used where the lease says CPI, or the other way round |
| Cap and collar | Applied to the whole period when the lease says per year, or vice versa |
| Compounding | Simple uplift used where the lease compounds |
| Rounding | Rounded at each step instead of at the end |
| Rebasing | Index reference changes and old and new figures are mixed |
None of these are hard to calculate once the rule is written down. The trouble is that it gets written down again, differently, each review.
The cost of a wrong figure
Undercharge and the difference is often never recovered, because it takes a year to spot. Overcharge and the tenant's agent finds it, which damages trust and invites them to check everything else. Either way someone spends an afternoon rebuilding the calculation, the accounts team issues credit notes or supplementary demands, and your rent roll carries a figure you are not sure of.
How we build the review calculator
- For each index-linked lease we record the mechanism as structured rules: index, base month, review month, cap, collar, annual or aggregate, compounding, rounding, and what your advisers say happens on rebasing.
- Published index values are pulled from the official source on a schedule and stored with the date they were retrieved, so each calculation shows which figures it used.
- When a review falls due, the calculator produces the new rent with every step shown: index values, ratio, cap or collar applied, rounding.
- A person reviews the working against the lease clause, which sits beside it, and approves or corrects it. Corrections update the stored rule, so the same slip does not happen next time.
- The approved figure goes to billing, either your property management system or Xero, with a letter to the tenant generated from your template, showing the calculation.
- Every calculation is kept, so when a tenant's agent queries a figure three years later, the working is still there.
The calculator applies what the lease says. If a clause is ambiguous, it flags it for your surveyor or solicitor rather than picking an answer.
What review time looks like after
The review arrives already calculated, with the working laid out the way a tenant's agent would check it. Your team reads, approves and sends. Queries are answered by forwarding the calculation sheet. The accounts team gets the new figure from the same place, so the demand matches the letter.
Is this happening in your portfolio?
- Index-linked reviews are calculated in a new spreadsheet each time.
- Tenants or their agents have queried an index calculation.
- Different leases use different indices, base months or caps.
- Only one person is trusted to do these reviews.
- You have issued corrected demands after a review.