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Case Studies > Rent Review

It’s not only about the money……

Our client was in a profitable business and wasexpecting a significant increase in their rent. Demand for retail space in their area had increased significantly in recent years.

The rent review clause in their lease confirmed that rent reviews were to be to ‘open market rents’ at the review date and did not allow much scope for negotiation. But the review of their lease also highlighted a number of other issues that, in their present circumstances, gave us and them cause for concern.

When the landlord’s proposal finally arrived they felt it was actually very reasonable and below what could be argued as the ‘open market rent’.

They found themselves in a quandary, do they accept the proposal before the landlord had second thoughts (that would surely have the landlord think his proposal was too low), or make a counter offer (which might have the landlord look more closely at the ‘open market rents’).

We proposed that our client reluctantly(!) accept the landlord’s financial proposal…… but subject to amendments to two terms within the lease. The rent review was conclude shortly afterwards.

The moral of this story is never give anything away for nothing, and always try and determine what is important to each party in the negotiation. Invariably at rent review time the landlord’s focus is achieving his desired rent and can be amenable to giving up something else to achieve his goal.

But the property market has collapsed….

Our client was beside themselves…. “How could the landlord propose to increase the rent when the property market was collapsing? The rent should be going down not up.” they told us.

Reluctantly we need to consider a number of things:

1. Yes the present economic climate is generally affecting high street and office rents. However there are still geographic pockets around the UK which are bucking the trend.
2. The vast majority of rent review clauses are on an ‘upward only’ basis. Meaning, even if market rents are below the present lease rent the rent will not go below what is presently being paid.
3. Rents may have gone down in the last year, but how much have they gone up since the last rent review 3 or 5 years ago?
4. There’s always room for negotiation.

Many businesses find themselves in difficult times at present and so being proactive in any business transaction has never been more important. Start early, know the facts and plan a strategy.