Commercial Property Rent Reviews (Part 5)
Triggering rent reviews:
The parties should be free to agree the reviewed rent at any time, and both parties should be able to refer the review to an independent third party for determination if they are unable to agree the rent.
Leases will often provide that a third party referral can happen if the parties have not agreed the rent by a specified time (e.g. three months) before the relevant review date. Tenants should ordinarily resist any provision which prevents the Tenant from implementing a review after a specified date.
Tenants should also resist provisions which allow the Landlord to serve a ‘deeming’ notice. In this type of provision, the Landlord may serve a notice specifying the new increased rent and, if the Tenant fails to respond within the specified time limit, it is deemed to have agreed that rent.
Part 3 of the Lease Code 2020 states that Leases should allow either party to start the rent review process, and should not impose time limits intended to prevent a review or to set a new rent through inaction by either party.
Defining the review dates:
It is preferable to state the rent review dates in the Lease as specific dates, rather than (for example) anniversaries of other dates, which can cause uncertainty.
The parties should also remember that, if there has been a material delay between the Heads of Terms stage and completion, the review dates that were originally agreed may no longer be appropriate.
(This article is not intended to be comprehensive or to provide specific legal advice. It should not be relied upon in the absence of specific advice given in relation to particular circumstances.)
For further information, please contact: Natalie Linehan, Andrew Williamson or David Thorp