Commercial Property Rent Reviews (Part 10)

Treatment of side letters and ancillary documents

If the parties have used a side letter to document an arrangement (perhaps a personal concession such as the ability to pay rent monthly, or the relaxation of an alienation covenant), they need to think about whether that arrangement should be valued on review. If so, clear wording should be added because the side letter will not necessarily be regarded as part of the ‘Lease’.

If there is a separate document (for example a car parking Licence) relating to the Tenant’s occupation, the Landlord may want the review provisions to reflect the benefit of this to the Tenant (and especially so if the right to park is a necessity). From a Tenant’s perspective, if the Licence to park is a personal right only for the benefit of the named Tenant, and can be withdrawn by the Landlord, the Tenant may well argue that it should not be valued.

Tenants should also consider whether there is anything “special” about the circumstances of their occupation : for example they may occupy an adjoining unit under a separate Lease. If the Tenant needs to use the adjoining unit to enjoy its own premises (perhaps the toilets are in the adjoining unit), the Landlord may look to include an assumption that the hypothetical Tenant has the right to use the toilets within the adjoining unit. This might seem fair (to the Landlord)  but a Tenant should argue that it is paying rent for the adjoining unit and so the Landlord should not benefit (in effect twice) from this.

If a Tenant has negotiated an essential right (such as a right to park) from someone other than the Landlord, the Landlord should not be permitted to value that right: the Tenant has procured it independently and should not the pay a higher rent as a result. The basic premise remains that the Tenant should not have to pay for something twice.

(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