This option is used to generate annual rent adjustments based on changes in an index value, such as the CPI. The CPI function automatically determines the annual percentage change in the index value and adjust the tenant’s scheduled monthly rent.
The CPI value for a particular time period is not usually available until after the anniversary period for the tenant, so the CPI Escalations are calculated retroactively. You can bill the charges that would have been collected during the time period that the tenant was billed at the old rate. This retroactive amount can be billed to a different income code other than the one being escalated.
CPI Escalations in the Commercial Management environment refer to increasing (or decreasing) certain tenant recurring charges based on charges in the Consumer Price Index (CPI) published by the government. This method of implementing rent changes is usually used in place of the Tenant Renewal function.
[Current Index / Base Index] X Percentage passed through to tenant X Tenant rent = Increase
The calculations then check the increase amount against any tenant minimum or maximum CPI increases and determine the tenant’s final CPI Increase. The procedure then generates a statement to let the tenant know their new rent amount for the next billing period.
The CPI method of increasing recurring charges is most often used to increase Base Rent, but can be used to increase other income codes as well.
Usually, the CPI values for a particular time period are not available until after the anniversary period for the tenant, so the CPI escalations are calculated retroactively. In this case, the client has the opportunity to bill back for the charges that would have been collected during the time period that the tenant was billed at the old rate.
See Also
To Calculate CPI and Print Statements
CPI Frequently Asked Questions
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