Rent Reviews – Every Tenant’s Nightmare!

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As Halloween is fast approaching and the fear begins to brew, many tenant’s nightmares are about to come true. Rent reviews are a dreaded time for tenants especially when it may be their first. The uncertainty of knowing how much your rent may rise can be daunting, especially for a company wanting to maximise its profits.

The basis of the rent review will be set out in the lease and can be based on many different options as follows:

Open Market Value

This is the most common type of rent review and is assessed based on a hypothetical letting of a comparable property at the review date. There are a number of assumptions and disregards that are usually written into the lease to protect a tenant from paying out more than necessary or avoid them paying twice i.e. where they have made improvements and to protect the landlord from losing out i.e. due to a tenant’s breach.

Index – linked

This is where rent rises in line with inflation and is most commonly in line with the Retail Price Index. This almost always guarantees that there will be an increase in the rent but not based on the property value itself.

Geared Leases

This may be used where a tenant intends to develop some land and the landlord would like to take a share in the profits, which can be done through an increased rent.

Turnover Rent

This type of rent review is most commonly used in shopping centres or retail units, as it is based on the tenant’s income and can often be used in conjunction with an open market value with a percentage of the turnover as a top-up.

Fixed/stepped increase

The clue is in the title, these rent reviews are decided at the outset of the lease and the landlord and tenant will have the certainty of knowing how much the rent is to increase or the percentage that it is to increase over time.

To help settle those nightmares if you are unsure about the type of rent review in your lease and how it may affect the amount of rent that you pay or for advice on commercial property matters generally, please contact our Commercial Property Team on Freephone 0800 689 0831 or send any questions through to Forbes Solicitors via our online Contact Form.

 

 

Trishna Modessa

About Trishna Modessa

Trishna is a paralegal in the Commercial Property department at Forbes Solicitors. Within her blogs Trishna deals with all aspects of commercial property including leases (from both landlord and tenant perspective), licences, acquisitions and disposals along with recent updates within the property sector.
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