Rent reviews & lease renewals


Broadway

“The occupational lease will set out the contractual terms between a landlord and a tenant. Understanding the respective responsibilities helps either party plan – review dates, break dates and expiry dates are all set down so it can seem straightforward but conditionality or time limits my complicate the situation”

Reviewing lease documentation well in advance of a known event is sensible and appreciating the outcome will enable preparations to be made – no one likes nasty surprises. Break clauses generally have strict time parameters and conditions – non compliance can be very expensive. We heard of a recent case recently where a retail occupier mistimed satisfying one of the break clause conditions – it cost them £75k.

Rossmore resizedIn a rising market as an occupier you need to know what your rent may increase by as this will have budgetary implications and may be a part of decision making around exercising a break clause or whether to renew your lease. It may be you are undecided so being in the possession of the facts will enable you to plan better for a lease expiry by getting an early appreciation of the market, any dilapidation obligations and cost implications to relocate. This exercise will help you set aside funds to meet your lease obligations and seek to mitigate the implications.

As a Landlord whether you have just one unit or a portfolio it is around anticipating any voids, whether the rent will be rising, will this affect your loan to value relationship on any funding you may have and much more. Building robust rental evidence and understanding the market and recent transactions is central to any productive dialogue with an occupier that can help sustain and build portfolio value.

Having sufficient time to plan can make a real difference to you. Review provisions are still predominantly upward only but at renewal there is no such conditionality so it is possible the rent may reduce. You need to know what the implications are for you and your business.

Where there are provisions for rent review in a lease these are set out based upon a series of “hypothetical” assumptions. These may seem irrelevant but they are part of the contract and may vary from the evidence that is in the market so these will need to be interpreted to reflect your situation. Generally there will be third party referral provisions if the parties cannot agree by negotiation.

On a renewal Costa croppedit may be the lease is a protected lease under the Landlord and Tenant Act 1954 as regards security of tenure but the parties cannot agree renewal terms and taking the matter to “Court” may be the only solution. Your solicitor will need to advise on the service of appropriate notices to protect your position whether as a Landlord or a Tenant. If your lease is outside the security of tenure provisions then it is about negotiating terms as on a renewal as the Tenant does not have any automatic rights to a new lease so it be largely driven by the property market at that time and the relative strength of either party and their respective negotiating positions.

Whilst a referral is very much a route of last resort in our opinion if one party is being intransigent it may be the only way to get a resolution. We would work alongside your solicitors who would provide the legal perspective and we would prepare submissions and counter submissions on your behalf as part of the process.

The Landlord and Tenant relationship has historically being adversarial but fortunately most parties now adopt the more mature approach of recognising whilst each party is looking to achieve what is best for them it is a “retail” process. The parties have a contractual relationship but good relationships make a difference and can see matters resolved promptly based upon each party being reasonable. Be pro active because having plenty of time enables you to be in control of the timetable as much as you can be so that you can manage the situation rather than have to react within tight timeframes.

At Boston Fieldgate we have extensive experience in these matters so to understand the “ins and outs” of your lease the call us on 01926 852199 or e-mail info@bostonfieldgate.com for a confidential consultation.

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