Rent Reviews

A rent review clause in a lease allows for the amount of rent charged to be adjusted periodically, during the course of the tenancy.

For landlords, including a rent review clause in a lease of business property may mean the difference between an ongoing viable investment and a tenancy which is no longer financially worthwhile.

For commercial tenants, rent review clauses require the closest possible scrutiny before any agreement. Anticipating what a rent review clause might entail when the lease is in operation can prevent expensive surprises and potentially costly disputes with your landlord.

For both parties, expert legal advice from a specialist commercial property litigation solicitor is critical. Luscombe Gray can help landlords and commercial tenants with these complicated provisions – whether you are looking to implement a robust rent review clause, or you are disputing its effects in an ongoing tenancy.

Luscombe Gray provides practical, effective and commercially-focused advice to clients involved in landlord/tenant disputes. Your business and its interests are placed at the centre of everything we do for you.

If you would like to discuss how Luscombe Gray can help your business, please do not hesitate to contact us.

Common rent review considerations

One of the major aspects of a rent review clause is the question of how rent is to be assessed when it is reviewed. There are several different methods:

Open market value – This is the most common, and involves analysis of the rental income the property could be expected to achieve if it were to be listed on the open market. Whilst technically this could lead to a reduction in rent where market values have fallen, protection is often added to the clause to ensure that the rent payable is only ever adjusted upwards.

Turnover – This involves assessing the tenant’s turnover and charging rent accordingly, often as a percentage. The clause will usually specify a minimum amount of rent to be paid in situations where turnover is low.

Retail Prices Index – This will base the rent review assessment on inflation with reference to the retail prices index. This method and the turnover method are often found in commercial leases in the retail sector.

Another important consideration is how frequently the rent is to be reviewed. As a landlord, insisting upon as many reviews as possible is not necessarily to your advantage. A rent review may involve considerable expenditure in professional fees, not just to conduct the review itself, but also to handle any disputes with your tenant which it may occasion. It is usual for a clause to allow for rent reviews every 3 to 5 years.

A rent review may also include certain ‘assumptions’ and ‘disregards’. These represent ways in which the rent review can operate without taking account of the actual state of the commercial property. For example, an assumption may be specified that, when determining the open market value, the tenant is assumed to have complied with all of their obligations under the lease. This prevents situations where the market value is reduced due to poor maintenance on the part of the tenant, perhaps for the purpose of influencing the rent review.

Similarly, a disregard might be specified that any improvements to the property which the tenant has made should be disregarded when assessing the open market value. This ensures a landlord cannot benefit from increased rent where a tenant’s work has caused the increase to the commercial property’s market value.

Rent review disputes

There are many parts to a rent review clause which may lead to disputes between the landlord and tenant. The terms of the lease will usually provide a dispute resolution process if a new rent – arrived at through the review – cannot be agreed by discussion and negotiation.

Rent review disputes can be very complicated and involve technical issues. Luscombe Gray can provide you with the specialist legal advice needed to ensure your rights are protected.

Instructing Luscombe Gray

Luscombe Gray is a boutique commercial property litigation firm, providing a legal service tailored to the needs of our clients.

We believe first-class commercial legal support should be available to all organisations. Whatever the size of your business, we are more than willing to provide our services and put our specialist skill and knowledge at your disposal.

Your case will be handled by Chris Luscombe personally, so you can be certain that your business will be able to call upon the expertise of an experienced commercial property litigation solicitor. Throughout his career, Chris has helped a wide range of businesses with their commercial property disputes, from small businesses, to national pub companies, to multi-national telecoms giants.

Luscombe Gray is based in the heart of Yorkshire, in Harrogate, with the reach to assist clients across the country.

If your business needs legal support for a rent review dispute, contact Luscombe Gray for clear, ethical, expert advice.