Having a long lease on your business property can seem like an attractive choice, as it provides a certain degree of stability. However, the rent review provisions in a typical lease can cause some problems if you are suddenly faced with rent increases. To be in a strong negotiating position when your lease is drafted, it will help to have the advice of a solicitor who has a detailed understanding of the rental review terms in your lease, and of the local commercial property market.
What are rent review clauses
The typical long-term lease will include a rent review clause which will provide for the rent to be reviewed every three to five years. It will also give details of what procedures will be followed when reviewing the rent. The landlord will usually be obliged to give the tenant notice of the new rent by a set date and the tenant will be obliged to respond by a stated deadline or they will be assumed to have accepted the new rent.
Most commonly the rent is based upon the open market rental value in the local area, however the new rent could be based on something else such as the retail price index. The lease will state the basis on which the new rent will be determined, and may also include terms that will allow the rent to increase but not decrease.
Should I negotiate the rent for my rent review?
As a tenant, it is advised that you keep a watchful eye on the local rental prices so as to have a guide to the open market values. As this is the most common basis for the rent, it will allow you a better understanding and give you a stronger position from which to negotiate.
What to do if I have a rent review dispute?
It is always advisable to negotiate the rent first, but if unreasonable requests or demands are being made then you may not be able to reach an agreement. The lease to the property should set out how disputes are to be handled, but this is generally by arbitration by an independent expert.
If you wish to discuss your rent review with a solicitor, then contact JMR solicitors, as we deal with rent reviews frequently and are well versed in the terms and conditions of your contract.