Richard Henry & Co - Chartered Surveyors

Rent reviews and Lease Renewals

Depending upon the length of the term, modern commercial leases generally contain provisions for the rent to be reviewed to open market value every three or five years.

If a rent review date is approaching, an early assessment of your situation is vital to ensure that the best possible negotiating strategy is prepared. Most rent reviews are upwards only i.e. the rent will not fall at review, so the impact of a rent that is agreed at too high a level over a period of three or five years can therefore be substantial.

When a notification is received that your landlord is seeking to increase your rent, professional representation is recommended, as there will usually be room to negotiate. To achieve the best possible settlement on your behalf, we negotiate taking into account:

• the location and characteristics of your property to assess their effect on rental value.
• the terms of the lease relating to the rent review process, some of which require the assumption of artificial circumstances to arrive at a rental value.
• the state of the commercial property market as a whole and evidence of lettings or rent reviews of comparable properties in the immediate locality.

The timetable for the service of notices and counter notices and the machinery for dealing with resolution should negotiations break down must also be carefully considered as a failure to act in time may result in a rent that is only initially a proposal becoming binding.

Lease renewals

In an uncertain economy, the expiry of a lease provides an opportunity to negotiate better terms or to relocate to more suitable premises.

If you do not wish to relocate, you will probably be able to renew your lease. Business tenancies in England and Wales are generally protected by the Landlord and Tenant Act 1954, Part II and amendments which provide security of tenure and the right to a new lease on the same terms as the old, except for rent which will be negotiated to open market value at the date of renewal. This also assumes that certain criteria for occupation have been met and that the landlords do not wish to occupy the premises either for their own business or redevelop them.

As shorter leases are now commonplace, many tenancies have been contracted out of the Act, meaning that the grant of a new lease is not guaranteed. This does not mean that the landlord will be unwilling to grant a new lease, but all of the lease terms will negotiable and not just the rent.

As lease renewal negotiations have many features in common with rent negotiations, we again counsel an early assessment of your situation and professional representation to achieve the best possible settlement of negotiations.

If you would like to discuss an impending rent review or lease renewal, a member of our professionally qualified team will be pleased to meet with you and advise without any initial obligation on a completely complimentary basis