What is a Rent Review?
Commercial leases typically provide for the rent to be increased periodically to allow for inflation. This allows landlords to grant leases for the length that many tenants require without having to restrict rent to the initial sum agreed.
Rent reviews are normally to ‘market value’ and ‘upwards only’ every three, four or five years. There are other forms of review based upon business turnover and pedestrian footfall.
How is the Revised Rent Assessed?
Most rent reviews are to ‘market rent’ although the lease often defines hypothetical circumstances including
vacant possession, good repair, full lease term etc.
A property is compared with others which are similar and have been let on the open market recently. In practice, no two properties are identical. Adjustments have to be made for location, size, layout of accommodation, condition, use, rent review pattern, tenants improvements and many other variables.
The landlord and tenant most commonly appoint valuers to value the premises taking into account all of the variables and market information. The valuers negotiate the market rent by analysing and testing each others evidence and assumptions.
The Rent Review Procedure
The procedure is laid down in the lease but most leases provide for the landlord to serve notice prior to the review date with a suggested revised rent based upon the valuation. The tenant appoints a valuer who advises on rental values and makes a counter proposal to commence negotiations. Failing a negotiated agreement, the rent is decided by an independent valuer or arbitrator
The starting point for what you need to know about lease, leasehold, rent, rent review, rent increase, rental review terms, commercial property, new rent, level of rent, headline rent, lower rent, rent review negotiation, rent review dispute and arbitration.