Your landlord has no right to arbitrarily raise your rent. Before the any new rent may go into effect, you and the landlord must come to an agreement on the amount, or the matter must be referred to a third party for evaluation. Discuss the matter with your solicitor about the potential rent increases or decreases so that they can negotiate with the landlord’s lawyer on your behalf. In this article, Can A Commercial Landlord Increase The Rent, we take a look at the process and mechanism involved.
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What exactly is a commercial rent review?
The process of evaluating and changing the rent paid on a commercial property is known as a “commercial rent review” (usually to reflect current market value). As such, this could lead to a rise or fall in business rents.
Landlords are usually astute enough to offer ‘upwards only’ reviews. This means that you will probably be lucky if your rent remains the same. In all likelihood, your rent will generally be increased to reflect the nationwide trend towards higher business rentals.
Typically, businesses would conduct rent evaluations every three to five years. If you have a commercial lease, you should check its rent review provisions to find out when your rent will be adjusted. Read it carefully and make sure you understand it before signing.
A commercial property lawyer will have the ability to analyse the rent review provisions with you and help you understand them to make sure you are getting a fair deal.
What are the different types of rent review?
Increases in rent are “index linked” when they are tied to a market indicator like the Consumer Price Index (RPI).
A stepped rent arrangement is one in which the parties agree to an annual, or other periodic, increase in the rent.
“Turnover rent” is not the same thing as a rent increase or decrease; rather, it is a system in which the amount of rent owed by the tenant is directly proportional to the amount of money the tenant brings in each year.
If a new lease were to be issued on the same terms as the current lease on the date of the review, the rent would be based on what the open market would consider the rent to be at that time.
Rent review dates
Commercial leases typically include rent review dates, but those are simply the starting point for when rent will be assessed. Normally, leases are designed so that the parties can commence a rent review within a specified time frame leading up to the review date, and that if they can’t agree upon terms on the revised rent by the review date, the old rent will remain in effect. Most leases also stipulate that reviews can be done at any point in the future, and that following any such review, the landlord can collect interest and a prorated amount of rent for the period between the review date and the date on which the rent was initially due to be increased.
Can I say no to an increase in my commercial lease?
If your landlord requests an increase in your rent, you have the right to refuse the increase by providing written notice to your landlord. The next step is to begin negotiating, or to give a professional negotiator instructions to do so, for a lesser figure that will satisfy both sides.
In the event of a rent review disagreement, the majority of commercial leases include that either party may submit the matter to a third party for review by an Arbitrator. If you and your landlord are unable to agree on a third party to assess the updated rent increase, the lease should allow the President of the Royal Institute of Chartered Surveyors (RICS) to do so.
When renewing a commercial lease, what room is there for negotiation?
Good tenants are often in a stronger position to negotiate favourable lease terms.
If your lease is protected, your landlord will be prohibited from making major modifications to the agreement without your permission.
With an unprotected lease, you and your landlord are free to work out whatever solution that makes sense so that you can remain a tenant.
How we can help
We have a proven track-record of helping clients draft a commercial lease. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
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It is important for you to be well informed about the issues and possible implications of signing a commercial lease. However, expert legal support is crucial in terms of ensuring a positive outcome to your agreement.
To speak to a member of our New Enquiries Team today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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