Rent review is a standard feature of the London commercial property marketplace, whereby landlords and tenants can renegotiate the rent terms for a commercial property. A rent review can be undertaken at pre-agreed intervals, such as 3 or 5 years, or it can be enforced through specific events, such as when a lease expires or when a tenant asks for a rent reduction.
This is when your rent changes. The situation of the property market is one of the major factors to decide the result of a commercial rent review. In a busy market, a landlord may be able to get higher rents, compared in a slow market tenants may get lower rents or other rewards. Also, aspects of location, property condition, the strength of the tenant’s business can all be important in the negotiations.
Rent reviews are used to judge the state of the property as it stands on the market, amending the lease according to the state of the property in comparison with other property on the market.
Typically, a rent review is asked for either after, say, 3 years as standard, or if the market rental value in a certain area or specific sector has seen significant movement – for example, if healthy demand means that rental levels are higher. To a landlord, a rent review can be mandatory in order to assist them in meeting their mortgage and other outgoings.
Landlords must notify tenants of a commercial rent review, which tenants are able to object to or negotiate on as it unfolds.
In London, it is typical for commercial rent reviews to be carried out by Chartered Surveyors who operate independently, and who will assess the property and the local market to decide what constitutes a fair rent. Both landlords and tenants can chose their own independent Chartered Surveyor to act for them in the process, and the two surveyors would then negotiate a rent between themselves.
Proper preparation ahead of a commercial rent review is essential for both landlords and tenants. Landlords should have a thorough understanding of the market, the condition and value of the property and the requirements of the tenant so they are best positioned to agree on the terms of a lease agreement. Additionally, landlords should have all financial information, including the rent payment history of the tenant, as well as other relevant documents to provide to the tenant.
The tenant should be well-prepared with financial information and other relevant data about their business to present to the landlord. The tenant should also be familiar with their rights and obligations under the lease and be prepared to negotiate in good faith with the landlord.
Conducting commercial rent reviews in London can be an intricate and time-demanding undertaking; however, with ample preparation and representation, both tenants and landlords can reach a mutually advantageous settlement.
As you examine the rental review notice, you must establish the rental value that is the highest that your business can tolerate and afford.
If you’re facing a rent review, take time to research the average square footage costs across local property types and opportunities, keeping in mind similar spaces in size and condition, and whether the new rent reflects property upgrades that the landlord may have made during your tenancy.
If you were to get the review and are not happy or wanting to discuss the new amount within the rent reviews lease renewals process, you are justified to do this. Reference market activity and changes that have been happened. You should be able to reach a middle ground accordingly.
In contentious scenarios, the assistance of a professional is often invaluable in saving time on both sides, ensuring that an agreement is reached with minimal dispute.
The main benefit of a rent review surveyor is the expertise and the ability to keep the rent review process moving and avoiding it completely stalling if an agreement can’t be reached. There will be a representative for both the landlord and the tenant there on the day to conduct the review and negotiate.
The process should be simple and painless with the assistance of a team of chartered surveyors – letting you be assured that a surveyor is on hand to manage disputes and see that it gets resolved justly.
Before requesting a rent review, either you or your landlord should make sure that enough notice was given.
Negotiation plays a huge part in a tenant’s rent review process, during which a Chartered Surveyor will advocate how crucial the importance of this notice period is, with a benchmark of around 3 months being the ordinary in the industry.
The property owner will either draw on the Retail Prices Index to calculate the sum and rate of commercial rent commonly accepted across the UK as a matter of course, or they will look closer to home and examine other rent reviews and local lease advisory reports to reach an average sum. Contact us today for assistance.
