David Rastrick, partner in our lease consultancy team, discusses your options if your landlord states their intent to increase your rent.
Most tenants of retail, office and industrial premises now-a-days take 10 year FRI leases that include tenant break options and rent reviews on the 5th anniversary of the term. The rent review provisions are intended to allow the landlord the opportunity to increase the rent in line with open market values in that locality every 5 years and whilst many tenants may think that rental values have been falling over the past five years, this is not always the case and there has been rental growth in certain sectors and locations around the UK.
The rent review provisions are set out in the lease and all negotiations will be carried out in accordance with the agreed lease. These provisions will include a procedure for the review to be determined by a third party, either an Arbitrator or an Independent Expert if an amicable settlement cannot be reached. Please note that in the event that the matter does go to third party then you may risk becoming liable for half of if not all of the Arbitrator’s or Expert’s costs.What should you do?
What should I do?
In the first instance don’t panic. We strongly advise you check your lease to make sure there are no onerous provisions making time of the essence. Once this is done you should respond to the landlord’s rent review notice requesting that they provide relevant market evidence that justifies the rent they are seeking. Whilst you might find that you are able to shave something off the landlord’s quoting rent it is often the case that you may secure a better settlement if you seek professional help and guidance. You will not lose your premises if you challenge a rent increase but you may adversely affect the viability of your business if you do not achieve the right settlement.
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