How to Negotiate a Successful Commercial Rent Review

Whenever you rent a space, whether commercially or residentially, it almost goes without saying that occasionally you will be faced with the prospect of a rent review. This is an occasion when your landlord may wish to raise or change your rent in some way, to reflect changing markets in a way that is often favourable to them. 

 

With that in mind, here are few important details that you need to know about your commercial rent review and how it may impact the amount you currently pay. 

 

What is a Rent Review? 

 

A commercial rent review is the process in which an assessment is carried out on the current rent paid on a property or space. This will then be adjusted, often to more accurately reflect the current commercial market. This means that in some cases the rent could go up or down based on the market. But, often, if a landlord suspects rent may decrease following a rent review, then no review will take place. 

 

How is New Rent Calculated? 

 

During a rent review a number of factors will be taken into account in order to ensure that the new rent reflects the market accurately. However, it also takes into account the current condition of the building itself as well. 

 

When considering a commercial rent review in particular other factors of concern include: nearby property prices, failing building infrastructure, location, growing or falling demand in the area, improvements the tenant may have made, and also increasing profit margins. In many cases, the rent review will be conducted in a way that is beneficial to the landlord rather than the tenant. So, again, if these factors suggest a lower rent, then your commercial rent review is likely to end in your rent remaining the same. 

 

Ideally, both parties should appoint their own commercial rent review surveyor. As, this way, an independent third party (or parties) can help bring a conclusion that is fair to both sides. 

 

Contesting a Commercial Rent Review 

 

In some cases, you may find that you disagree with the amount your rent has risen or the way that the rent review was conducted. If you feel it was unfair or done incorrectly, then you very well may want to content the issue. 

 

The way that you can work to contest the review is to take the next step and ask for an independent party to review. This is easier to do if you both had your own rent surveyors in place in the first place, as then you have two sets of data and the competing views to bring forward to the third party. 

 

A rent dispute that escalates or continues beyond a certain point may need to be dealt with in a court. Or, in a worst case scenario, your rental contract may be terminated by either side if it is mutually agreed that the new rent is untenable to either side. 

 

Paying the New Rent 

 

Once, or if, a new rent is agreed upon, then you can expect to start paying straight away. But, note, that you may also have to make back payments. This is because your landlord has the right to ask for payments on a rising rent from the rent review date set forth in your rental agreement. Before agreeing to a commercial rent rise this must be taken into consideration, as it may leave you having to make a large payment of back rent as a result. 

 

If this is the area of contest, i.e. your landlord is claiming back payment for an extremely long period, then you may have to agree with longer term repayment plans on top of your regular rent.  

 

Final Thoughts

 

On the whole, a commercial rent review is something that is largely unavoidable. But if you feel that it is being done in a way that is wholly unfavourable to you or even unfair, then there are ways for you to contest and make this less the case. The stress and hassle of dealing with a rent review can be quite extreme, so hiring an independent third party surveyor can be the best way to deal with this.