Service charge cap linked to RPI

by Practical Law Property

A clause that restricts the amount of service charge a tenant is obliged to pay under a commercial lease by establishing an indexed service charge cap. This clause provides for the cap to be reviewed annually in line with the Retail Prices Index (RPI), applying to both the Estimated Service Charge and the final Service Charge. It offers alternative drafting options for indexation, including a single base approach and a rebasing approach, allowing parties to choose the most suitable method. This clause addresses practical considerations such as the apportionment of the cap in the first and final years of the term and the implications of the landlord altering the Service Charge Year. It also includes important mechanisms for handling potential changes to the RPI, including its proposed alignment with the Consumer Prices Index including owner-occupiers' housing costs (CPIH), or if it becomes impossible or impracticable to calculate the indexed cap, with provisions for expert determination to resolve disputes.