Portfolio - Issue 5 - Autumn 2018 - Page 64



PROFESSIONAL SERVICES
WHAT IS A COMMERCIAL
RENT REVIEW – AND
WHY DO YOU NEED ONE?
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C 20.7 M 2.7 Y 0 K
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Rent reviews are a key part of the lease agreement when renting a commercial
property and are something which tenants must pay good attention to.
The process can be complex and both
parties (the landlord and the tenant) will
have conicting objectives. A landlord will
often employ a professional surveyor to
conduct and oversee the process and any
negotiations to achieve the best possible
outcome for them, which is why a tenant
should also do the same.
The rent review process includes
assessing and adjusting the rent paid on a
commercial property. The rent review is
primarily there to benet the landlord and
allows them to increase the rent in line
with current market rates during a lease
term. These reviews often happen
between every 3-5 years - the details of
which will be outlined within the
commercial lease.
The most common type of rent review
is an open market review, which is the
assessment of the property’s current
market rental value. To assess this, a
professional surveyor needs to collect and
analyse all relevant information, including
current market activity, and comparisons
of the rents of surrounding and similar
properties. There are a number of
variables to consider such as lease term,
specication, size, covenant strength,
market demand, incentives and location
all of which have an inuence on how the
rent is assessed.
The lease will provide assumptions
and disregards within the rent review
clause which must also be considered.
These clauses are important
considerations in the assessment of
Market Rent, and often only a qualied
surveyor will be able to quantify the
impact of these in rental terms during the
negotiation process.
Landlords often seek uplifts in rent
where there is no justication for such.
Tenants who decide to undertake their
own negotiations will often accept the
uplifted rent to simply draw the matter to
a conclusion - or are willing to accept a
rental uplift based on a business decision,
rather than ensuring they are paying an
appropriate rent in line with the market
norm.
Leases always allow for a costly and
time-consuming third-party
determination, which are necessary
should an agreement not be reached.
Landlords can often use the threat of a
referral to a third-party as a negotiation
tactic to put pressure on tenants to accept
their rental terms.
Often leases allow for rent reviews to
be back-dated to the review date
contained within the lease no matter how
long has passed since this point. This can
result in hefty backdated rent being
payable, often in one lump sum which can
have detrimental impacts on cashows.
Although there will be costs involved in
appointing a surveyor, these often lead to
much more signicant cost savings over a
longer period of time.
Rent reviews are a complicated issue
which do have the potential to become
time consuming and expensive if not
undertaken by experts during the initial
stages. As a tenant, it is always benecial
to seek professional advice from an early
stage so that you understand your
position, and to ensure that you do not
pay any more in rental terms than is
necessary.
If you would like any advice,
please contact our specialist
Professional Services team on
0191 232 8080 or visit
www.bradleyhall.co.uk
MEET THE BRADLEY HALL PROFESSIONAL SERVICES TEAM
Richard Raque
Director and Head of
Professional Services
0191 232 8080
64
Carl O’Brien
Senior Surveyor
and Registered Valuer
0191 232 8080
Rachel Roberts
Chartered Surveyor
and Registered Valuer
0191 232 8080
Lisa Hall
Administrator
0191 232 8080
Lauren Gill
Administrator
0191 232 8080
PORTFOLIO MAGAZINE

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