Whether you are a landlord or a tenant, rent reviews provide the opportunity the reduce rental costs or increase property value. The process of the rent review will be outlined by the lease and if the landlord and tenant cannot agree with the new rent, the review should be referred to a Chartered Surveyor who is a member of the Royal Institute of Chartered Surveyors (RICS) for review. They will ensure that the level of rent is a fair reflection of the property.
Our top tips if considering a rent review:
DOCUMENTATION To ensure an accurate review make sure that you have all relevant documentation at the ready, this will also help to maximise your chances of getting the result you’re after. This will include a copy of the lease, any licences or deeds.
TIMING One of the most important elements of a rent review is whether there are any time constraints associated with when the review can take place. It may be that it has to occur at a particular time and notice may be required. Ensure you are aware of these factors when making your application.
REVIEW DATE Typically occurring every three to five years, the intervals between rent reviews will be stated in the rent review clause(s) of the lease. It is important to be aware of this as it could affect timing issues such as notice periods.
‘UPWARDS ONLY’ RENT REVIEW Make sure that you’re aware of the nature of your rent review clause. Most rent reviews are ‘upwards only’ meaning that the rent can only increase and not decrease. However, there are also ‘downwards’ clauses allowing for reduction in rent.
COMMERCIAL MARKET Being familiar with and having knowledge of the local property market is a vital factor of the rent review. Experienced surveyors who know the local market well will be able to advise on the going values and negotiation strategies.
NEGOTIATION If you struggle to come to an agreement on the new rental value it is wise to appoint a surveyor who can carry out further negotiations for you. Spend time finding the right surveyor for your case.
THIRD PARTY REPORT Following negotiations, should there still be disagreement over the rent review a third party referral should be made to an independent expert i.e. another surveyor who will produce a detailed report.
INTEREST The longer the review process takes, the more chance you will incur interest charges and backdated rent. It is advisable to try and settle the review as early as possible and should negotiations go past the review date, then budget for these additional costs.
FINALLY… Ensure relevant memoranda is signed by both parties with the new rent agreement and lease included. This will act as your proof of review and will be needed at the next review.
by Laurence Cox