What is a rent review?
A rent review is a contractually-agreed mechanism for adjusting the rent payable under a lease, which will usually include a method for the rent to be determined if the parties are unable to agree what the rent should be. They can be complex contractual arrangements, therefore the start point in any rent review should be a careful and considered review of the contractual terms.
How are rent reviews carried out?
Many rent reviews are resolved by agreement between surveyors, but ultimately there is the potential for having to have them determined by a third party – such as an arbitrator. Before the review is initiated, it is important that the evidence in relation to valuation is considered carefully and that appropriate instructions are provided to a surveyor, who will be able to provide expert witness evidence on rent by way of a report and consideration of comparable properties.
Early co-ordinated planning of the strategy and consideration of the evidence by both landlords and tenants is recommended. This will enable a realistic evaluation of the merits of a party’s position and also enable the risks associated with a dispute to be assessed and mitigated.
What if the landlord and the tenant cannot reach an agreement?
The concept of a rent review is relatively straightforward, but each is a distinct contractual arrangement under the terms of the specific lease in question. If agreement of the reviewed rent cannot be achieved between the parties, it is important that the dispute is resolved in accordance with the terms of the contract. This requires careful consideration of the specific terms of the lease in question.
Where a rent review is to be dealt with under some form of dispute resolution mechanism, it is important to ensure that the procedure is followed correctly and that the roles of advocate and expert do not become confused, as this could have a detrimental impact on the evidence placed before the tribunal.
What needs to be done once this process is completed?
Once the review process has been completed - either by negotiated agreement or by some form of determination process - it is important that this is documented, usually by way of a memorandum attached to or marked upon the lease.