Commercial Property Rent Review
Rent reviews can be one of the most technically complicated aspects of modern commercial property.
Rent Reviews in commercial leases provide the opportunity for adjustment of the passing rental normally on a 3 or 5 yearly cycle and most commonly to the current open market rental value.
The complex drafting of lease rent review clauses means that expert knowledge is required in each case in order to interpret the lease provisions and thus negotiate a suitable level of rental.
On occasions when the parties cannot agree a reviewed rent, the lease will stipulate how the dispute must be resolved – normally by a 3rd party, requiring preparation of technical submissions and counter submissions by both landlord and tenant.
As such Rent Reviews require the input and knowledge of a Chartered Surveyor specialising in commercial rent reviews to ensure a successful outcome.
You can find answers to more common rent review questions in our below FAQ. Our specialist rent review Director is Paul Knighton, who has the experience to help both landlords and tenants. For any enquiries, please do not hesitate to get in touch.
Rent Reviews – FAQ:
Rent Reviews – Frequently Asked Questions:
I have a 10 year lease which provides for a review of the rental after five years. What does this mean?
A Rent Review is an event which takes place during the term of a lease at a pre-defined date and at which time the rental can change. The lease would provide a specific Rent Review section which would set out the basis for your Review.
What would be the basis of my Rent Review?
Again, the basis will be set out in your lease. The most frequent type and basis of rent reviews are to an Open Market Rental Value basis. As such, your rent will be set at the correct level of rental applicable at or around the subject Review Date on other comparable premises in comparable locations.
I have made significant improvements to the property and which will increase the rental value. Will this be taken into account at my Rent Review?
As ever, this depends on the individual circumstances of the lease and other documents. As a tenant it is always essential to document any improvements which you make to the premises to prove that you have done them with consent and that they have been done at your cost. As such these will then be classed as “Tenants Improvements” for which you would not be expected to pay extra rent at Review.
Can my rent go up or down at Rent Review?
This depends on the wording of your lease, but the vast majority of rent reviews that are based on Open Market Rentals are still on an “upwards only” basis. What this means is that the optimum result from a tenants’ point of view is that the rental remains at its current level at Rent Review. Some leases are “upwards or downwards” and in such cases clearly the rental can be less, but these are still few and far between.
What happens if a revised rent on review cannot be agreed?
Again, the individual wording of your lease will set out the situation to be followed in the event of a dispute. Most leases require that such disputes are referred to an independent third party who will act either as an “Expert” or “Arbitrator” and whose decision will be final and binding on the Parties. In such circumstances, the third party normally invites written representations from the Parties and then counter-representations in response before making his decision.
How should I deal with my Rent Review?
Whether you are a Landlord or a Tenant of a commercial property, a Rent Review based on a Market Rent is a technical matter and which requires expert advice.
For this reason most businesses use the services of a Chartered Surveyor who can provide comparable evidence, analyse your lease provisions and argue the factors upon which your correct level of rental should be based.
Whilst a settlement direct with your Landlord or Tenant can be achieved, this will often be at a level which is significantly different from the rental figure which would be arrived at following proper negotiation by a Chartered Surveyor. For this reason expert advice is essential.