Commercial Rent Review Disputes

Commercial rent review disputes

A commercial rent review is a periodic assessment of the rent payable on a commercial property. It’s typically carried out every three to five years, as specified in the lease agreement. There are several methods of review, but by far the most common is based upon ascertaining and imposing upon the tenant the open market rent at any given review date.

Disputes can often arise between the landlord and tenant when the rent review mechanism is triggered but the parties cannot agree on what the new rent should be.

In such cases, our experienced team can provide specialist and tailored advice to ensure that the rent review dispute is resolved most favourably and cost-effectively.

How we can assist with disputes

The hypothetical lease

If a revised rent cannot be agreed informally between the parties, the matter may have to be referred to a third-party expert or arbitrator. We have links to leading experts and are well-versed in the somewhat abstract concept of the hypothetical lease to which the expert or arbitrator will have to have regard.

In essence, the hypothetical lease seeks to remove some of the “real life” considerations that might have an impact on the open market rent. For example, if the tenant had not been complying with their repairing obligations (meaning that the premises were in a poor condition), the hypothetical lease would disregard the current (bad) condition of the premises and prevent the tenant from “benefitting” from their breach of covenant.

Likewise, where the tenant had made improvements to the premises or generated substantial goodwill, the hypothetical lease would disregard the current (improved) condition of the premises and prevent the tenant from being “penalised” by the improvements/goodwill.

In these complex situations, legal advice is advised and our team are able to provide clear-cut, straightforward, commercial and pragmatic advice.

Retrospective commercial rent reviews

An aspect of commercial rent reviews which can be overlooked is the ability of a landlord to “retrospectively” invoke a review if the review date has been inadvertently missed.

With retrospective rent reviews, the general presumption is that time will not be of the essence unless there are sufficient “contra-indications” suggesting otherwise. Again, this is a complex area, where it is advisable to seek legal advice. Our team have a wealth of experience in advising commercial landlords in successfully invoking retrospective rent reviews to maximise the rental income from their property assets.