How UK Commercial Tenants Can Check Their Rent Review is Fair

If you run your business from a commercial space, you likely lease the business premises from a landlord. This means you will have a commercial lease agreement containing your lease details. One of the key lease terms is the rental payment you must make in return for occupying the property. This is a crucial lease obligation for you, as it may be one of your business’ critical expenses and is likely one you need to make monthly. While you might agree on a rent rate that works for your business at the start of your lease term, the rent may be subject to review. Where your rent increases due to a rent review, you may have concerns about whether it is fair. This article will explain how to check if your rent review is fair.

A Rent Review 

You can expect the rent to always increase from what it was before. But, sometimes, it can remain the same.

Your lease should have a rent review clause detailing when a review will occur, usually every three to five years. The lease clause will also describe how your landlord will review the rent. For example, your landlord may carry out your rent review through:

• a Retail Price Index (RPI) or periodic rent review;
• a turnover rent review; or
• an Open Market Rent Review.

If you want to check if your rent review is fair, consider how your landlord carries out our review and what they base it on.

Fair Rent Review  

Several factors can determine whether your rent review is fair, as explained below.

Reasons

If your landlord carries out a rent review and increases your rent, they should be reasonable and provide the basis upon which they came to the new rent. 

Market Rental Values

To check if your rent review is fair, you can look at the rental prices for similar commercial properties in the area. You can do this by looking at property websites or speaking to estate agents. Remember to look at commercial spaces with the same ‘use class’ as your property. ‘Use class’ details what commercial activity planning law permits at your premises.

Property Value

When your landlord assesses the value of the property you occupy, there are certain assumptions and disregards that they factor in. These should be specified in your lease agreement.

When your landlord considers assumptions, these could be that you, as the tenant, have stuck to the lease terms in your lease agreement. For example, if, as a commercial tenant, you have a lease term that states you have a full repair obligation, the property value will assume everything is in complete repair even if, in reality, it is not because you have not kept to the lease obligation. This is because your non-compliance should not lower the value of the landlord’s property.

Rent Review Advisor

One good way to check if your rent review amount is fair is to hire a professional rent review advisor or surveyor to see you through the process. A commercial lawyer can also look at the wording of the lease to see what the landlord should be doing when conducting the review. 

First, however, you should check your lease agreement to see if you have to abide by any timeframe for hiring a review advisor or surveyor, as your rent review clause may detail this. Generally, the sooner you hire one, the better, as they can start researching the local area and select evidence to see if your rent review is fair.  

Key Takeaways

When you lease commercial premises for your business, you will likely go through a rent review at some stage. This is where your landlord assesses the rent you pay for your business premises and changes it to align with market conditions or increases the rent according to the lease. Where this happens, you may wish to check that the rent review is fair. An excellent way to do this is to hire a professional such as a rent review advisor, who can check the process and compare the market. You can also do this yourself by looking at rental market value locally. You can also check that your landlord gives the proper notice for any rent increase. If they do not, the rent increase may not be able to go ahead.  

If you need help as a commercial tenant understanding if your rent review is fair in the UK, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions