Commercial Property

Commercial Rent Reviews

If your landlord suggests a new rent at rent review time, there is no need to accept their terms without seeking proper advice. Your landlord must agree a new rent in accordance with the lease terms. Just because the rent figure offered seems fair compared to what other neighbours are paying, this does not mean it is what you should be paying.

We are experienced at handling rent negotiations for commercial property leases.

How a Rent Review Should Take Place

Most leases will contain detailed provisions governing how a rent review should take place. For example, they will state that the rent must be reviewed to the higher of the current rent and the ‘open market’ rent. The ‘open market’ is carefully defined in the lease and our experienced solicitors can help you decipher this.

The lease is likely to contain ‘assumptions’ and ‘disregards’ that are to be taken into account when the rent is reviewed. For example, it is assumed the property is in good repair and any work you have done to the property would be ignored. For advice on the amount of rent being demanded then you will normally have to speak to a valuer.

How do Rent Reviews Work for Landlords?

Since the recession hit in 2008, short term leases have become much more prevalent. Where a commercial lease is granted for 10 years or more there will usually be an upward only rent review provision at intervals of 5 years.

The rent is reviewed to the open market value that could be achieved based on a number of assumptions set out in the lease. For advice on the amount of the new rent you will normally have to consult a professional valuer.

The rent review clause will also set out the hypothetical terms to be assumed and both Landlord and Tenant are advised to appoint surveyors early on. The surveyors will negotiate the new rent, taking into account the terms of the lease and comparison properties.

If the parties cannot agree then the lease will normally provide for the matter to be settled by either arbitration or by the appointment of an independent expert to make the final decision.

If it’s time for a rent review and you don’t think you’re going to get much more from the tenant, think about other ways to gain value. We can help you negotiate with your tenants, and liaise with a surveyor to accurately assess what rent you can achieve or what other terms can be negotiated.

Abigail McMillan

Abigail is a Trainee Solicitor in our Property Department.

Read More About Abigail
Burt Brill & Cardens have been incredibly helpful taking us through the journey of lease extension with minimal fuss and pain. We had heard how difficult and cumbersome it was to extend a lease. Definitely this was not our experience with Burt Brill & Cardens Solicitors being in charge.

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