Rent Review

[RandyMarsh]

I am nearly halfway through a ten year lease on my shop and it's time for the rent review. The landlord has invited me to a meeting to discuss/negotiate the new rent level and I suspect they will want a substantial rise. The lease says that the new rent should be the maximum amount the premises could earn if they were in good condition etc. If we can't agree then it goes to a rent assessor. When the lease started in October 2020 we were in Covidy times when rents might have been lower but the street we are on was well occupied with fairly upmarket businesses and shops the size of mine were hard to find. Now, many of the shops are empty and the brand name shops (Boots, Wilko) have gone and been replaced by Heron Foods etc. Business rate rebates have reduced so that would put a downward pressure on rent levels I would expect.

Looking at the premises that have come on the market I don't particularly detect much of rise in rental value. However there aren't any similar premises currently available to use for comparison and I don't have a record of the rent levels of recently offered properties.

The landlord has a fairly large portfolio of properties. They have been very good about doing repairs quickly when needed although there are long term issues (drainage and subsidence) that they aren't interested in addressing.

Any advice on how I approach this meeting? I don't have evidence of current rent levels, only subjective opinions but I would like to put the case that the premises aren't worth more than they were 5 years ago. Obviously cost of living inflation has been high over the last few years but that isn't necessarily reflected in commercial rent levels. Does anyone publish an index of commercial rent levels for different regions? Is it worth going for the rent assessment or is that likely to add more cost and come back with a higher figure than I can negotiate?

Thank you for any advice you can offer.

 

[Chris Ashdown]

I am nearly halfway through a ten year lease on my shop and it's time for the rent review. The landlord has invited me to a meeting to discuss/negotiate the new rent level and I suspect they will want a substantial rise. The lease says that the new rent should be the maximum amount the premises could earn if they were in good condition etc. If we can't agree then it goes to a rent assessor. When the lease started in October 2020 we were in Covidy times when rents might have been lower but the street we are on was well occupied with fairly upmarket businesses and shops the size of mine were hard to find. Now, many of the shops are empty and the brand name shops (Boots, Wilko) have gone and been replaced by Heron Foods etc. Business rate rebates have reduced so that would put a downward pressure on rent levels I would expect.

Looking at the premises that have come on the market I don't particularly detect much of rise in rental value. However there aren't any similar premises currently available to use for comparison and I don't have a record of the rent levels of recently offered properties.

The landlord has a fairly large portfolio of properties. They have been very good about doing repairs quickly when needed although there are long term issues (drainage and subsidence) that they aren't interested in addressing.

Any advice on how I approach this meeting? I don't have evidence of current rent levels, only subjective opinions but I would like to put the case that the premises aren't worth more than they were 5 years ago. Obviously cost of living inflation has been high over the last few years but that isn't necessarily reflected in commercial rent levels. Does anyone publish an index of commercial rent levels for different regions? Is it worth going for the rent assessment or is that likely to add more cost and come back with a higher figure than I can negotiate?

Thank you for any advice you can offer.

Only you can answer these questions, What does your lease actually say, but you are not limited to just one meeting, you can attend the meeting and actually learn the increase if any will be; and then discuss it there and then, or go away and think about it and base your answers on either facts or reasonable estimates of similar properties, talk to the other shop managers. A printed reply outlining the facts is a good way to keep a record of what was agreed.

 

[MikeJ]

This is no help whatsoever but...

We owned our building through our pension, and that rented it to the company. We did a rent review, and the review came back lower than we were currently paying. So, we asked them to take another look and explained we wanted a higher figure (so we could put more money into the pension...). Low and behold, we had a 30% increase.

The moral of the story being, the assessor is only guessing. It's going to come down to what you're willing to pay, and what they're willing to accept.

 

[Paul Kelly ICHYB]

A lot can happen in 5 years - tyinging yourself down now would probably be a mistake!

 

[Michael Loveridge]

Do you have a break clause in your lease? A lease for as long as 10 years is pretty unusual these days, and they would normally have at least one break clause, typically at 5 years.

If you do have such a clause, and it's not too late to activate it, you will have a lot more leverage if you can indicate to the landlord that you'll activate the break if they are looking to increase the rent.

If you can't reach agreement then you should obtain advice from a local firm of commercial surveyors, who will have inside knowledge of comparables in your area.