The rise in the Consumer Price Index (CPI) in Colombia is directly affecting tenants, as it leads to an upsurge in the prices of goods and services. This increase has broader implications, impacting the overall cost of living and specifically affecting the cost of leases for individuals and businesses.
In Colombia, most housing leases have a clause that establishes that the landlord may adjust the value of the lease annually based on the increase in the CPI. The adjustment is made by multiplying the current lease value by the percentage increase in the CPI, which closed at 13.12%.
Therefore, if the CPI rises by 13.12%, the lease value will also increase, and lessees will have to pay more for the same property. With such a high increase, some renters may not be able to afford the increase in rent and may have to look for cheaper housing options or negotiate the increase with the landlord if possible or the real estate broker.
However, unlike residential leases, in corporate leases, real estate intermediaries can perform an analysis for the negotiation of such increases, but they must always present a position of neutrality when negotiating on behalf of the lessees with the landlord.
“In the corporate sector, the real estate manager’s purpose is to ensure the lessees’ retention, finding a balance between the owner’s and the lessee’s positions. It is recommended to listen to the owner’s position and negotiate by offering a counteroffer, to make the decision to lower a few percentage points in this increase,” expressed Gustavo de la Torre Muñoz, LATAM Real Estate Director at MTS Consulting + Management.
One of the counteroffers that can be made is to extend the lease contract’s duration so that the owner recovers, in some way, what they are missing out on. On the other hand, the lessee can request a minimal reduction in a few percentage points to reach an agreement.
It is important to note that the regulation of the increase in the Consumer Price Index (CPI) in lease contracts varies according to local laws and regulations. In some cases, maximum limits for rent value adjustments can be established, or parties may be allowed to negotiate and agree on a different adjustment.
Ana María Mejía – LATAM Consulting and Market Intelligence Manager at MTS Consulting + Management
