Commercial Property Rent Reviews (Part 6)
Open market rent definition:
An open market rent review clause typically includes a definition of ‘open market rent’, which in turn comprises:
- a description of the terms of a hypothetical Lease
- a list of assumptions to be made, and
- a list of matters to be disregarded.
“Best rent”: Some definitions of ‘open market rent’ refer to the ‘best’ rent that is achievable. Although the ‘best’ rent may be the same as an open market rent, ‘best’ rent allows a valuer to take account of “special” bids (i.e. the often higher rent that a “special party” —such as an adjoining Tenant —may be willing to pay).
In addition, given that most valuers will say that the rent for a property falls within a range of values (and so will typically opt for a rent in the middle of that range), the ‘best’ rent would be the rent at the top of that range.
A requirement for the hypothetical Lease to be at the ‘best’ rent’ is therefore Landlord friendly.
“Fair” or “Reasonable” rent: These terms are usually avoided by Landlords as they require a subjective test of what would be fair or reasonable for the Tenant to pay. That may not necessarily be the open market rent.
(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