Date Matters!

In September 2020, as schools re-opened and lockdown measures eased, businesses restarted and staff drifted back to their places of work, many companies faced rent reviews which required negotiating.

Why does the rent review date matter?

Because commercial properties, whether retail, offices or industrial, are normally valued as at the review date documented within the lease. Commercial leases usually allow for a review every four or five years, and the market can change a great deal between one review date and the next.

Does it matter when the rent review notice is served?

Usually not for the valuation. As time is usually not ‘of the essence’, a Landlord can serve a Rent Review Notice after the review date, and the property is still valued as at that date (when time is of the essence). Whilst some rent reviews and lease renewals took place during lockdown, many Landlords were hesitant to serve notices on struggling Tenants during those challenging times, and we witnessed a high volume of reviews being activated once lockdown ended.

How did lockdown affect rent reviews?

It helped Landlords whose reviews were due before Covid-19, and Tenants whose reviews fell during lockdown:

• Reviews due before Covid-19: Landlords serving Rent Review Notices later could still value their properties as at the date of review. In reality, this meant a Tenant was unable to argue that the impact of Covid-19 should be taken into account, as it was not relevant at the review date.
• Reviews due during lockdown: Tenants could potentially benefit from the severe impact that closing businesses and furloughing staff had, and could argue for substantial allowances when calculating revised rents, should any increase be justified.

What should Landlords and Tenants check before a rent review?

The provisions within the lease. Calculating revised rents in a crisis like lockdown is not an enviable task: whilst Landlords must not force Tenants out of trading through unsustainable rents, Tenants must also agree the fairest rents with their Landlords. Our advice to both is, before activating the review or commencing a negotiation, do check the provisions within the lease, as it is true to say, the date matters! See also Rent reviews: best practice.