Leases of commercial buildings can prove to be complex documents, governing the relationship between landlord and tenant. Arguably, the most complex provisions of the lease are those relating to rent review.
The basis on which the rent can be determined upon review will be specified in the lease agreement and it is for each individual lease to determine the mechanism used where the most common form still remains an open market rent review. The open market rental value will be affected by the general level of rents for similar premises in the area.
Although complex, this type of review does allow the rent to be set at a level that is in-line with market conditions at the time of the review. That said, it is common for open market rent review provisions to be drafted to provide for upwards only reviews meaning that on review, the landlord will either retain the level of rent payable or benefit from an uplift.
When the time comes for the rent to be reviewed, the procedure can be commenced either by notice or by the parties entering into negotiations. It is common for a lease to stipulate that a rent review will take place every five years. However, a trend towards more flexible, shorter leases has seen rent review increasingly taking place at three year intervals.
Smiddy & Co provides a comprehensive service for both Landlords and tenants. We have the ability to analyse comparable evidence to ensure the best outcome and offer advice on relevant procedures including the following:
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