Both Landlords and Tenants must be aware of the best practices to consider when commencing with a rent review.
Most Commercial Leases allow for a rent review every three, four or five years. In order to ensure the best possible outcome, whether a Landlord or a Tenant, there are various steps which should be undertaken in order to ensure the very best results.
The first point for either a Landlord or a Tenant is to be aware when exactly the rent review date is according to the lease. This is especially important for Tenants as in many instances, ‘forewarned is forearmed’. If the rent review date is known and diarised, provisions can be made for a potential rent increase should there be justification and money will be set aside for the back-rent which may be demanded from the Landlord at some point.
Landlords should also be aware that ignoring the rent review may be harmful to the relationship with Tenant. Tenants do not relish back-rent due to a Landlord not having served notice at the correct rent review date. Commercial properties are usually valued as at the review date so leaving a rent review a year or possibly longer with the view to achieving a higher rent due to potential market growth will not prove fruitful.
Both Landlords and Tenants must remain realistic in their approach when negotiating a rent review. Landlords can technically quote any rent they wish however unless there is justification, a surveyor will prove why the Landlord is incorrect. Conversely, there are instances when the proposed rent is justified and the Tenant must be flexible in order to reach a realistic agreement which is mutually beneficial.
It is of course prudent for both Landlords and Tenants to instruct surveyors to act as their representatives and ensure the fair open market rent is achieved. Tenants who represent themselves often do not achieve the best outcome and the end result is extra money paid in rent which a professional could possibly save them via tough negotiating skills and due to an in depth knowledge of Commercial Leases which can be used to both the Landlords and Tenants benefit when required.
An open mind is essential when entering into the rent review process. Be aware that in most instances, a negotiation will be needed to achieve an amicable outcome. Be prepared to accept advice from the professionals who strive to negotiate the most favourable result instead of applying to the RICS for the Appointment of a Third Party which can be costly and stressful with no guaranteed results.
There are many other factors which come into play during a rent review but the above will hopefully be enough to start off both Landlords and Tenants with the right frame of mind and on the correct footing.