Index increase

Counting the index increase

What is an index increase in rental contracts?

Rental increased being tied to the cost-of-living index are fairly common. It is an increase that the tenant can count themselves, and therefore the landlord does not have an obligation to inform the tenant of the new rent every year, although it would be according to the fair rental practices to do so. 

Usually the rental increase is 0-2% per year with the mentioned index, but the tenant should check the contract carefully. Sometimes a clause that permits increases under, for example, 2%, and in these cases if the indexal increase would be less than 2%, the increase is 2%.

Example:

The rent of the apartment is tied to the cost-of-living index, which you can find on the Statistics Finland (Tilastokeskus) webpage.

In the example, the rental contract has been signed on 1.4.2017, when the most recent available score, 1923, is from February of 2017. The original rent is 700 euros and the rent is checked annually.

The increase is counted by figuring out the relation of the score of the increase time point and the score from the time of signing the contract. This number is then multiplied by the original rent.

Checking the rent in April 2018

The most recent available score, 1935, is from February 2018. The new rent is therefore:

1935 / 1923 x 700 euros = 704,36 euros

Checking the rent in April 2020

The most recent available score is 1976. The new rent is then:

1976 / 1923 x 700 euros = 719,29 euros