Negotiation is always the best method of handling a rent review and one of the HS Legal solicitors team of experts will assist you in this process to ensure a positive outcome for your business. At HS Legal Solicitors we understand that solving this issue promptly is best for you and best for your business and will advise you of the best way of achieving a positive outcome.
What is rent review?
Rent reviews allow landlords of commercial property to periodically regulate the rent charged to tenants based on different factors.
As a landlord you will want to review the rents on your properties as set out in the lease. Doing so will increase your rental revenue and profitability.
As a tenant you will want to minimise your liability and so proper negotiation and representation at rent review will be important.
Why do commercial leases have rent review clauses?
Where market rent is payable, the landlord will want to ensure that it always receive the maximum possible rent for the site and not bound by the rent amount which was set at the start of the lease.
How can rent be reviewed?
There are various ways in which the rent can be reviewed:
- the landlord and tenant might agree to increase the rent in fixed amounts each year
- the landlord and tenant might assess the rent based on the tenant’s turnover at the premises
- the rent is based on market values
The most common and typical type of rent review is the open market rent review.
How often do rent reviews occur?
Typically rent reviews occur every 3 – 5 years, depending on the length of the lease. A rent review clause in a commercial lease will dictate how often a rent review will occur, the method, procedure and how to treat disputes.
How is the value of the rent decided?
- Open market rent review involves a periodic revaluation of the rent based on what the rent would be if the premises were re-let fresh at the date of review.
- The new rental amount is based on rents in the local market for similar leases. If after the review, it’s found that the rents in the local area have increased then the rent for the premises can be increased.
In most situations, the landlord and tenant should try and agree to the new rent themselves.
Normally, both parties appoint their own property surveyors to help manage the process and negotiations.
Rent reviews in commercial leases are complex and should be carefully considered and negotiated. If you have any specific questions or would like more detailed advice on rent reviews, then please contact on 01206500181.