How to negotiate rental rates

Be well prepared: You should start considering the rent review around 18 months before the review date. Make a diary note of the review date to make sure this doesn’t get missed.

Know what your lease says: There may well be time limits in the lease as to when the parties need to act. Don’t end up accepting the landlord’s proposed rent because you fail to respond with a counter-notice, if required, by a set date. Remember that there may be other provisions in your lease which affect the rent review, not just the rent review clause. Some clauses, especially in older leases, can now lead to a discount on rent review.

Negotiate: Even if the rent proposed looks reasonable, the landlord is probably trying to achieve the same level of rent to similar local properties, so there will usually be some room for negotiation.

Get expert advice: To get the best possible rent, a surveyor experienced in dealing with rent reviews will be required. You should involve your surveyor from an early stage.

Get a number of quotes: Remember, the lowest fee quoted by a surveyor may not achieve the highest saving. If you can negotiate a success related element into the fee, this incentivises your surveyor to get a good result. Iif they don’t achieve a significant discount, it costs you less in fees.

Start negotiating at the right time: In a rising market, the earlier the rent review can be agreed and concluded, the lower the rent will be. Therefore start negotiating as soon as the lease terms permit. The reverse may be true in a falling market.

Consider bringing in a third party to settle the rent: There may be circumstances where a landlord is acting unreasonably and will not conclude the rent review, especially where the rent review provision allows the rent to go down as well as up. You may want to compel the settlement of the review taking place and your lease will provide for an independent expert or arbitrator to be appointed in such circumstances. Costs of third party determination can be high but may be justified in such situations.

Be reasonable: It can be an expensive exercise forcing the other party to have an expert or arbitrator appointed and not attempting to conclude the review, as that third party has the power to make costs orders against the losing party.

Abide by your lease terms: If the rent review is in dispute, this does not mean you can refuse to pay your rent while it is being negotiated. You must carry on paying at the old rate until the new rent is settled. Usually you then have to pay a top-up back dated to the rent review date. Failure to comply with the lease may lead to it being forfeited.

Get the reviewed rent properly documented: Once a review has been settled, ask your solicitor to put together the rent review memorandum, which confirms the outcome of the review and is attached to the lease.

Gary Dunger is a commercial property solicitor at SA Law. Contact him on (0)1727 798079 or gary.dunger@salaw.com

 

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