Clients often ask about the rent review process.  So we want to provide a guide to demystifying rent reviews and offer our advice.  We want to ensure you know the facts.

The commercial lease you signed will outline how and when your rent is reviewed. Understanding the process and timetable so as not to get caught out is important.

A DIY rent review or Expert Advice?

Leases these days are for shorter terms.

The lease you signed will be unique to the property you occupy and to your company.  It can be a complex document full of legal wording so sourcing expert advice early on, when you both sign the original lease and as you deal with any rent reviews, will be invaluable.  As a tenant, you will avoid any unforeseen increases.  Or, as a landlord, you will be prepared for any potential issues with proposed changes.

Timing

Usually, leases allow for structured rent reviews to take place either on a 3 or 5 year pattern.  These can be based on various methods.

An open market assessment allows for the rent of the property to be judged at a current market value and is typical of how a rent review is established.  The rent review provision in the lease will set out various assumptions and disregards.  These are the cornerstone for assessing the level of revised rent payable.  It is important to have a clear understanding of these key points as well as the lease as a whole.

Other contemporary methods used include a review based on business turnover, but on the pre-agreed terms, or on an index linked basis calculated on the increase in the RPI/CPI (Retail Price Index/Consumer Price Index).

Key Terms are Difficult to Grasp

Rent reviews shouldn’t be complex, but they are nuanced.

There are a number of terms to understand, such as upward only, collared and capped.  Also, there are implications an option to break the lease and/or a restrictive user user clause could have on review. This starts to explain that without professional help navigating intricate clauses, market trends, and legal terminology can be more complex that it need be. It is good to have a clear understanding of the various terms and conditions in good time in order to formulate a clear strategy.

Where can you obtain the stewardship and advice you need?

As Chartered Surveyors, the team at Holloway Iliffe & Mitchell have been handling rent reviews since 1991. We therefore appreciate the detailed context of establishing rental values in relation to commercial property.  When it comes to dealing with rent reviews, we use our experience in demystifying forthcoming rent reviews for landlords, investors and tenants alike. We provide the professional advice and expertise that is needed to ensure that the rent review is handled in accordance with the terms of the lease.

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