Lease advisory service: rent reviews FAQs

Understanding the rent review process and having a strategy in place is vital for any commercial landlord or tenant to ensure the best outcome for you.

Here we consider some FAQs when it comes to the rent review process. 

Q: When is the best time to instigate a rent review?

A: Market conditions will dictate when is strategically the best point at which to trigger a rent review. We would always recommend Landlords and Tenants begin preparing for a rent review a minimum of twelve months before the review date. Your lease may also set out when a rent review may be triggered and look out for ‘Time of the Essence’ wording – if this is present then act fast to ensure you comply with the timings set out, or you could miss your opportunity to engage on the rent review entirely.

Q: How is the revised rent set?

A: Your lease will set out the mechanism to which the revised rent is to be assessed. Usually this is to Open Market Rent, in an upwards only direction, and based on comparable evidence of recent transactions on similar properties in the local area. Some review clauses include an index linked mechanism however (either to RPI or CPI) so it is important to check your lease to confirm the basis of the rent review before instigating discussions.

Q: My rent review clause talks about assumptions and disregards, what are these?

A: A market rent review is undertaken in a “hypothetical” scenario. Assumptions and disregards set out the terms on which the Open Market Rent is to be assessed. These are typically relatively standard and the assumed terms follow the wider terms of the lease, tenant improvement works are disregarded and any other specific matters which would affect the rent payable are detailed. The assumptions will also set out the hypothetical term which is a key factor in a rent review negotiation.

Q: What happens if the parties cannot reach agreement?

A: Your lease will also set out the dispute resolution mechanism should the parties be unable to reach agreement on a revised rent. Disputes are normally resolved via Arbitration or Independent Expert Determination and such appointments are managed by the RICS Dispute Resolution Service (‘DRS’). These processes are normally time consuming and costly – however sometimes unavoidable. A surveyor will be able to advise you on the benefits, costs and risks of third-party determination as well as options for cost-protective options such as Calderbank offers.

Q: How can Cluttons help with my rent review?

A: Cluttons have an experienced team of rent review surveyors with a detailed understanding of the latest legislation, case law and market activity to provide advice and clarity on how these may impact upon the rent review. We cover the whole of the UK and have experience dealing with all core asset classes, as well as alternative use class properties. We actively seek to avoid disputes and third-party referrals to avoid unnecessary costs and delays, but where there is no option, we have the required experience of both Arbitration and Independent Expert determination to achieve the right result for our clients.