VIDEO: WHAT IS A RENT REVIEW? 

By Richard Russell on 08/03/18

 

"Here at the Lorenz Consultancy, we have a proven track record of dealing with Rent Reviews and Lease Renewals, I myself have 20 year’s experience, and my colleague Anthony Lorenz, has over 50 year’s experience, within the industry.

We predominantly work within Central London, and have an in-depth knowledge of the Central London office, retail and leisure market.

A Rent Review within a commercial lease provides and opportunity for the Landlord to increase their rents, because, often over a period of the lease, the rental levels will increase.

Historically, if you go back to the 1970’s, you have very long-term leases with 14 yearly review patterns, and over those sort of periods you did not get much rental inflation, whereas now, you will see rental inflation of 50%-100%, and even 150% in some cases.

So, most commercial leases today are for a period of 10 or 15 years, and will contain a rent review at the fifth year.

That gives the Landlord the opportunity to put the rent up to the current market rent at the review date, even if the Landlord does not activate the rent review on the review date, most leases give the opportunity to activate that review at any date, up until the expiry of the lease.

So, Tenants have to be very wary, if the market has increased significantly, to put aside the money for a rent increase.

If you are an Occupier of a premises, on a lease that’s over 5 years, you should familiarise yourself with the terms of the lease to see if it does contain a rent review, because the Landlord can instigate the review normally at any time on or after the rent review date. So, he could activate it 2-3 years after the review date. He may well forget about it, or if there is a significant grow in the market, he may wait to activate it until better evidence comes along, in order to prove a higher rent.

Therefore, our advice to any Occupier, would be to take professional advice on the terms of your lease, to see :- 

  1. If it contains a rent review, and;
  2. How you can activate it in order to try and mitigate or limit the increase, but also to make sure that the Landlord instigates the review, and that review is agreed, as close as possible, to the review date.

The next stage is to enter into negotiations once you have done that research, and try to reach a negotiated settlement, so you bring the rental value, the terms of the lease, and also the floor areas of the premises, and try and reach a negotiated settlement, which is a fair end for both parties.

For this reason, The Lorenz Consultancy thought it was important to provide Occupiers with a Rent Review Guide, so that any Tenant facing, or in the middle of a Rent Review, had a basic understanding of what a Rent Review entails.

However, most Rent Reviews can be far more complicated, and our recommendation is that you seek professional advice because, often, an unrepresented Tenant will agree a rent that is significantly higher than a Tenant who takes professional advice."