17 January 2020
Ignore Rent Review Drafting At Your Peril
Professional services, Rent reviews & Lease renewals
When a landlord lets a building or a tenant agrees a new lease, it's very easy to focus on the main terms of the new lease and pay little attention to that all-important rent review clause and its implications further down the line.
If all goes to plan, once the letting deal is agreed, the main heads of terms are sent to the solicitor from the letting agents to draft the new lease and both sides will then work on the detail of the lease until an overall agreement is reached and, hopefully, the lease eventually completes. But did either side consult with rent review surveyors to ask about the implications of the wording of the rent review clause? If not then at the point of the next rent review, either the landlord or the tenant may be in for an unpleasant and even costly surprise when their rent review surveyor comes to consider, interpret and negotiate the rent review.
To avoid this, at the same time as agreeing the main lease terms at the letting stage, parties may wish to consider appointing a rent review surveyor to liaise with their solicitor on the wording of the rent review clause. This will help ensure that at the next rent review the landlord achieves the rental increase they were expecting rather than a lower figure as a result of a poorly drafted rent review clause.
Addressing the rent review clause and its implications before the lease completes could avoid a situation where, for example, the assumed lease for the purpose of the rent review gives a longer than intended notional term, or where the break option or rent free period due in the middle of the lease cannot be reflected in the rent at review.
Conversely, rent review surveyors can also help provide tenant clients with help in drafting rent review clauses that are as tenant friendly as possible, to help mitigate increases in rent when the reviews are next negotiated.
Despite the rent review clause being arguably as important as any of the main terms of the lease, its impact is often overlooked when it comes to the wording and potential implications on value and is not taken as seriously as it perhaps should be. But a little additional foresight at the point that the lease terms are being agreed will prove invaluable to the landlord or tenant at the next rent review.
SHW's Lease Advisory surveyors can advise both landlords and tenants on this key area of the lease agreement to help them achieve the outcome they anticipate at rent review.