As a UK Commercial Tenant, How Can I Appeal My Rent Increase? 

Summary

• Under a commercial lease in the UK, a rent review clause allows a landlord to periodically adjust rent based on factors such as the Retail Price Index, open market value, a fixed amount, or turnover; tenants who disagree with a proposed increase can serve a counter-notice and attempt to negotiate a new rental amount.
• If agreement cannot be reached, the lease will typically provide for third-party dispute resolution through either an arbitrator – who considers both parties’ arguments – or an independent expert – who applies their own expertise without regard to either party’s views; unreasonable arguments in either process can result in a costs award against you.
• Tenants must continue paying rent during an appeal, usually at the old rate, but if the increase is ultimately upheld, the landlord can backdate it to the original review date and charge interest on the shortfall.
• This article is a plain-English guide to appealing a commercial rent increase for UK business tenants, prepared by LegalVision, a commercial law firm.
• LegalVision specialises in advising clients on commercial leasing and property disputes.

Tips for Businesses

Act promptly upon receiving a rent review notice – you typically have only 28 days to serve a counter-notice if you wish to challenge a market review. Seek legal advice before responding to ensure your position is realistic and well-founded. Continue paying rent at the current rate during the dispute to avoid default. Factor in the potential for backdated rent and interest when assessing whether to appeal.

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On this page

• Why Rent Increases 
• Notice of Rent Increase
• Expert Determination
• Appeal  
• Key Takeaways
• Frequently Asked Questions

As a business occupying a property, you pay rent in return to your commercial landlord. Your commercial lease agreement will specify the amount of rent you must pay. However, it is common for this rent amount to change throughout your tenancy. For instance, if your lease agreement contains a rent review clause, it could increase. However, you may be able to appeal your rent increase depending on the circumstances. This article will explain how tenants can appeal their rent increase.

Why Rent Increases 

Your rent amount for your commercial premises may increase if your lease agreement has a rent review clause. This allows your landlord to review your rent periodically, typically every three to five years. Depending on the review mechanism, they may adjust your rent according to growth and development changes in the area where it is located. For example, factors like inflation and retail development can increase property values or associated costs. 

There are various things your landlord may base their assessment on, such as:

• inflation, by linking the review to the the Retail Price Index;
• a fixed amount;
• the open-market value of your lease; or
• your turnover.

Notice of Rent Increase

If your rent increases due to a rent review, your landlord should give you notice as set out in the lease.

If you are unhappy with the rent increase, you may have the right to delay paying the proposed new amount of rent where your lease allows you to challenge the review amount. In this case, you would continue to pay the old amount of rent. You and the landlord would then try to agree to a new rent level. Remember that while you may be able to delay payment of the increased rent, typically, a landlord can claim back payment if the rent was meant to increase from a particular date. Often, they can also charge interest on the shortfall amount. 

Where you are challenging a market review, you will often have 28 days to give a counter-notice to the landlord if you disagree with the rent increase, and you and your landlord can try to negotiate a new rental amount. It is advisable to take legal advice before you respond.

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Expert Determination

If you and your landlord cannot agree on a new rent amount after a rent review, then the lease will usually state that the landlord can appoint an expert. This expert will often be a surveyor with a specified level of experience, who makes a binding determination as to your new rent.

Appeal  

Following a rent review, you may decide to appeal where you believe that the rent increase might be:

• unfair; or
• breaches the terms of your commercial lease.

Dispute Procedure

When you appeal a rent change after a rent review, you must follow the ‘third-party dispute resolution’ procedure or the ‘Alternative Dispute Resolution’ (ADR) provisions in your lease agreement if your agreement has these. The detail should be in your rent review clause.

When you appeal a rent increase, the procedure will generally involve an independent surveyor or an arbitrator who will aim to decide what your new rent level will be going forward or whether your rent amount will remain the same. However, the role each plays is slightly different as follows:

• an arbitrator will take both your and your landlord’s arguments about the rental amount and then decide on what the new rent will be, and
• an independent expert will not take into account the view of you or your landlord but use their expertise to decide on your new rental amount.

Your argument must be realistic and reasonable when you appeal your new rent amount. If you are not, the third party in charge of the dispute procedure can award costs against you. The same applies to your landlord. 

Seeking legal advice is advisable before taking the appeal route. When you dispute your rental amount, it can be time consuming and costly.

Court

When you appeal a commercial rent review, and you are not content with the decisions of the third party through the dispute procedure, you may be able to appeal to a court.

The court may determine what the new rental amount will be, howeverby law, the court must accept the provisions of your lease . This process is also likely to be costly and time-consuming, which is why it is essential to obtain legal advice.

Rent

As a commercial tenant, it is essential to note that when you appeal an increase in rent due to a rent review, you still need to pay rent while the appeal is in progress. However, you will generally pay it at the old rate, and once there is a result of the appeal and a new rent is in place, you will start to pay this. 

However, as noted above, where the rent increases, your landlord can backdate it to the date of the rent review. You will be asked to pay any deficit between that and the old rent for the appeal period. This may include interest in the increase between the old and new rent.

Key Takeaways

If you dispute your new rent amount after a commercial rent review, you may be able to appeal it. The first step is to let your landlord know you disagree through a counter notice to their formal notice about the increase. Then, if you cannot agree on the increased rental amount, you should take the dispute procedure as outlined by your commercial lease. This will involve a third party, such as an arbitrator or an independent advisor. The third party will decide on a new rental amount in the future. If you disagree with this, you may take the issue to court to decide the new rent amount.

Both procedures can be costly and time-consuming, so you should seek legal advice.  

LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced leasing lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.

Frequently Asked Questions