Rent Reviews

Negotiations are founded in market evidence as are rent review submissions for arbitration or expert determination

Our Rent Review Valuers support landlords and tenants alike covering most property classes: retail, office, industrial, health our team provide valuation services.

Commercial leases: Rent Reviews & end of lease provisions

Commercial tenants need to be aware that when a commercial lease comes to an end there is only an automatic right to stay in the property if your landlord has not served a Section 25 Notice on you and if your tenancy is inside the 1954 Act. If your lease is protected then when it ends you will have the right to stay in the property and hold over on the same terms until new terms are agreed or either party applies to Court and the Court imposes a new lease. A landlord may loose the right to call a rent review if he/she does not call it when and how the lease says, so, as a tenant it may be in your interests to keep quiet.

Leases & Rent Reviews: What type of lease is yours?

Does it

require the landlord to serve formal notice to call the rent review
say if the landlord fails to call the rent review they loose the opportunity to review the rent until the next review
let the landlord review the rent when they remember to call the review but not backdate any increased rent
let the landlord review the rent when they remember to call the review AND backdate any increased rent
say if the rent is not agreed by a certain date that the landlord must appoint an arbitrator or independent expert to set the rent

What to do if you receive a Section 25 Notice to end your lease

Act fast:
if you receive a Section 25 Notice and you want to stay in the property, you must act ast and serve a Section 26 Notice requesting a new lease.

Beware:
if you fail to observe certain time limits you may loose the right to a new lease. Whilst for tenants protected by the 1954 Act the landlord’s grounds to seek possession are limited you may well finding yourself having to prove that the landlord’s grounds are unreasonable.

The type of lesae you have determines what happens at lease renewal.

What type of lease is ours? One a lease that:

automatically ends your occupational rights as tenant on the last day of the lease
do you, the tenant automatic security of tenure and not need to serve notice to request a new lease
requires you, the tenant to serve notice to request a new lease, are you aware of the timescales
gives you, the tenant security of tenure whether or not you serve notice to request a new lease
requires you, the tenant to serve notice of your proposed terms to be able to backdate any new rent to when the lease ended
says if terms are not agreed by a certain date that you must apply to the Court for the Court to set the new terms

The argument for later living rent

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The later living opportunities

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Role of an Arbitrator & Independent experts

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Commercial leases & Terminal Dilapidations Schedules

A terminal dilapidations schedule will be served by the landlord and may call for you to put the property back into the condition it was in when the lease started or to pay them a cash equivalent instead. The best way to ensure you are not required to do more than is reasonable is to find the “schedule of condition” you ought to have had prepared by a Surveyor when you took the property on. A schedule of condition represents the true condition of the property at the outset and then creates the start point for negotiations to make sure you are not being asked to give something better back than you took.

The formula
Condition of the property at the start of the lease
add	repairing duty set out in the lease (Note 1)
=	condition that you have to give the property back in

Note 1: The repairing duties are as set out in the lease. Dilapidations are called for where the condition of the building at the end of the lease falls below that documented at day 1 of the lease in the schedule of condition.

To be in the best position you need:

your day 1 Schedule of Condition (as a starting point), and to
a repairing clause that is not too onerous.

From these documents the Surveyor interprets the landlord’s schedule to negotiate what really needs repair. The aim being to reject overly onerous repairs, those that go beyond the duty of the lease.

How to read your repairing obligations
When it comes to understanding dilapidations there are several types of repairing obligations. Is yours a lease that requires the tenant to

put the building into repair
keep the building in repair
maintain the building in repair

and based on the actual condition of the building does repair mean:

a patch repair
renewing part of a building element (ie, patch repairs to the roof)
renewing the whole of a building element (ie, a new flat roof)

Terminal dilapidation negotiation tactics
Your Surveyor will need to know whether your preference is to do the repairs:

before the end of the lease
after the lease has ended, OR
pay you the cash cost of repairs and compensation for any rent you will lose because the repairs were not done until after the lease ended

It is worthwhile thinking about the repairing obligations set out in the lease and doing the works you think will be required during the last 12 months of the term, as this will minimise the landlord’s chance to serve an onerous Dilapidations Schedule on you.

Role of an Arbitrator and an Independent expert

Should negotiations between the parties not resolve matters then the lease should set out to whom a dispute must be referred. Often the lease will set down that the President of the RICS or RIBA or other professional body should nominate an Expert to adjudicate the matter. Depending on how a lease is drafted this Expert may be required either to take the role of an Arbitrator or an Independent Expert - below we set out the differences.

Role of an Arbitrator

Must comply with formal statutory framework, laid down by Arbitration Act 1996, (in conjunction with the lease or contract).
Oral hearings are more common, and can be expensive.
The Arbitration Act 1996 allows parties the ability to control the process.
The decision is based on evidence/submissions to the arbitrator.
You cannot sue an Arbitrator for negligence.
There is some scope for re-opening the decision, if incorrect.
Arbitration is a private process, with a duty of confidentiality. In theory, you are not able to use another award as evidence, without the consent of parties. The Arbitrator will not attach much weight to such evidence.

Role of Independent experts

Informal process (as opposed to legislative), the procedure derived is solely from the terms of the lease or contract.
Decisions are usually based documents submitted, so compared to Arbitration, may be cheaper.
It is the lease or contract that gives parties the opportunity to control the process.
An expert may use their own knowledge and expertise, to reach their decision.
You can sue an expert for negligence (in theory).
The decision is more likely to be final and binding, (even if incorrect).
In theory, you cannot use a determination as evidence in another process without the consent of parties. In any case, little weight tends to be attached.

Within Ringley we have Solicitors, Engineers, Negotiators and Property Managers so together we act as expert witness; prepare submissions for arbitration & can advise on statutory and tactical procedures. Ringley’s expertise encompasses; rent reviews, dilapidations, lease renewal and sourcing tenants. The rest of this page provides useful advice for tenants.