Resolving commercial rent review conflicts

Commercial leases will often include a mechanism for the contractual rent payable under the lease to be reviewed at certain intervals during its term.

There are a number of methods of review, but by far the most common is based upon ascertaining and imposing upon the tenant the “open market rent” as at any given review date.

Commercial rent review disputes

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

In such cases, our expert Property Disputes team in Derby, Leicester and Nottingham can provide specialist and tailored advice to ensure that the rent review dispute is resolved in the most favourable and cost-effective manner.

What is a 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. At Nelsons, 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 upon 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 own 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, straight forward, 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 asset.

Our team is highly regarded and recommended by the independently-researched Legal 500 as being one of the top teams of specialists in the country.

For further information in relation to how can assist with commercial rent reviews, please contact one of our expert solicitors who will be happy to have an initial discussion with you. Please call 0800 024 1976 or contact us via our online enquiry form.

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