A Gentleman’s Handshake Is Not Always Enough

I once received a telephone call from an anxious Tenant who had just been notified by his new Landlord that he intended to activate the 2014 rent review, and had proposed a revised rent close to double the passing rent.

Can a new Landlord reopen a rent review the old Landlord agreed?

Yes, if the agreement was never written down. In the case I was called about, the previous Landlord had met with the Tenant at the time of the 2014 review and they had agreed a nil increase (due to various factors), which is why the rent had remained at the same level since 2010. The Freehold was then sold to a new Landlord who was not aware of that agreement.

My immediate question to the worried Tenant was whether Memoranda had been signed to document the agreement with the previous Landlord. The answer was no: he had trusted the Landlord and had not foreseen the Freehold being sold. Nor did he have any other evidence of the conversation to show the new Landlord.

Can a rent review be agreed verbally?

Yes. A rent review can be agreed verbally between Landlord and Tenant, and should there be evidence of the conversation taking place, the agreement would be binding.

Is a rent review memorandum a legal requirement?

No, but it is the evidence that protects you. The Handbook of Rent Review by Kirk Reynolds and Guy Fetherstonhaugh says that a Memorandum of Rent Review acts only as evidence that the review has been agreed, the implication being that it is not a legal necessity.

If, however, a memorandum has not been signed and there is no proof of the conversation taking place, it can be, and often is, regrettable for the Tenant, as the review will likely be activated should a Landlord desire to do so.

Can a new Landlord claim back rent for an old rent review?

Often, yes. Most leases stipulate that the review can be agreed at any time, and as iniquitous as it may seem to ask a Tenant to pay retrospective back rent, this is acceptable within the eyes of the law, despite the financial burden on the Tenant.

How do you protect a rent review agreement?

Record it in a signed memorandum. Our mantra at Richard Lionel & Partners is clear: when facing a rent review, ensure you have professional representation and that any agreement made is properly documented, such as by the signing of Memoranda, as there are occasions when a gentleman’s handshake is not always enough.