Rent Indexation Based on Changes in Consumer Prices Is Not a Way for Landlords to Obtain Easy Profit
Rent Indexation Based on Changes in Consumer Prices Is Not a Way for Landlords to Obtain Easy Profit
A significant court decision was recently achieved by BDO practicing attorney Jānis Zaļais, in which it was essentially recognised that a sharp rise in consumer prices does not permit unscrupulous landlords to obtain disproportionate profit at the tenant’s expense or to impose their will on tenants.
On 26 February 2026, the Vidzeme Regional Court issued an important ruling that clarifies that even if a lease agreement includes a rent indexation clause tied to consumer price changes, a rapid increase in consumer prices alone is not an automatic basis for a landlord to obtain unexpected gains or to use this situation to force tenants into unfavourable contractual terms.
The court emphasised that landlords must not unreasonably increase the rent by invoking a sharp rise in consumer prices if such an increase would lead to unfairness and uncertainty in rent levels. Likewise, using this circumstance to compel tenants to accept unfavourable lease terms — for example, increased rent or additional charges — under threat of another consequence does not align with the principle of good faith.
This result was achieved by attorney Jānis Zaļais from BDO, representing a tenant in a longstanding dispute with the landlord.
“This principle also applies beyond lease relationships to similar legal relationships, as a contract must be predictable. This is a clear signal to the rental market — the consumer price index is not an instrument that can be manipulated to raise rent to absurd levels, or to use it as a pressure mechanism,” emphasises the sworn attorney.
According to the attorney, the lease agreement provided the landlord with the right to unilaterally adjust the rent (indexation) based on consumer price changes. The landlord attempted to exploit astronomical consumer price increases in 2023 to secure additional profit at the tenant’s expense by demanding rent and management fees that were 16.2% higher. As an alternative, the landlord offered a slightly smaller rent increase if the tenant extended the lease.
“This is classic unscrupulous behaviour — using market shocks to create disproportionate benefit at the expense of a business partner. The landlord offered the tenant significantly higher monthly payments over the remaining two years, or a small discount if the lease was extended,” notes the attorney.
The court essentially ruled that the index is not an automatic formula that a landlord can use to demand more money in every situation. There are limits, and this judgment defines them clearly.
The precedent highlights two key principles that will be very significant in future rental disputes:
Indexation mechanisms are not absolute;
Rent must remain predictable and fair.
As the attorney notes:
“This case sends a message to all market participants — contracts are not instruments for imposing one party’s will. Contracts are about mutually beneficial cooperation. If one party uses an unpredictable situation to impose a disproportionate burden on the other, the courts will not overlook that. This precedent gives other tenants across Latvia greater certainty in rent agreements, reinforces the principle of good faith, and creates stability for long-term lease relationships.”
Although the landlord has the right to file a cassation appeal, the Supreme Court is not considering the case on its merits, and the Vidzeme Regional Court’s decision sends a clear signal that courts will look at the substance of a situation, not just formal references to an indexation clause.
On 26 February 2026, the Vidzeme Regional Court issued an important ruling that clarifies that even if a lease agreement includes a rent indexation clause tied to consumer price changes, a rapid increase in consumer prices alone is not an automatic basis for a landlord to obtain unexpected gains or to use this situation to force tenants into unfavourable contractual terms.
The court emphasised that landlords must not unreasonably increase the rent by invoking a sharp rise in consumer prices if such an increase would lead to unfairness and uncertainty in rent levels. Likewise, using this circumstance to compel tenants to accept unfavourable lease terms — for example, increased rent or additional charges — under threat of another consequence does not align with the principle of good faith.
This result was achieved by attorney Jānis Zaļais from BDO, representing a tenant in a longstanding dispute with the landlord.
“This principle also applies beyond lease relationships to similar legal relationships, as a contract must be predictable. This is a clear signal to the rental market — the consumer price index is not an instrument that can be manipulated to raise rent to absurd levels, or to use it as a pressure mechanism,” emphasises the sworn attorney.
According to the attorney, the lease agreement provided the landlord with the right to unilaterally adjust the rent (indexation) based on consumer price changes. The landlord attempted to exploit astronomical consumer price increases in 2023 to secure additional profit at the tenant’s expense by demanding rent and management fees that were 16.2% higher. As an alternative, the landlord offered a slightly smaller rent increase if the tenant extended the lease.
“This is classic unscrupulous behaviour — using market shocks to create disproportionate benefit at the expense of a business partner. The landlord offered the tenant significantly higher monthly payments over the remaining two years, or a small discount if the lease was extended,” notes the attorney.
The court essentially ruled that the index is not an automatic formula that a landlord can use to demand more money in every situation. There are limits, and this judgment defines them clearly.
The precedent highlights two key principles that will be very significant in future rental disputes:
Indexation mechanisms are not absolute;
Rent must remain predictable and fair.
As the attorney notes:
“This case sends a message to all market participants — contracts are not instruments for imposing one party’s will. Contracts are about mutually beneficial cooperation. If one party uses an unpredictable situation to impose a disproportionate burden on the other, the courts will not overlook that. This precedent gives other tenants across Latvia greater certainty in rent agreements, reinforces the principle of good faith, and creates stability for long-term lease relationships.”
Although the landlord has the right to file a cassation appeal, the Supreme Court is not considering the case on its merits, and the Vidzeme Regional Court’s decision sends a clear signal that courts will look at the substance of a situation, not just formal references to an indexation clause.