Rent Reviews – Red Flags
Most commercial property leases include provisions allowing the rent to be reviewed at regular
intervals so that it can be adjusted to the market level current at the review date.
Delayed rent reviews
Q. If a landlord forgets to carry out a rent review on a review date, can a tenant assume the old
rent will continue indefinitely?
No! Unless the lease states otherwise, outstanding rent reviews can be carried out at any time
after the review date has passed.
Q. How would the revised rent be calculated on an outstanding rent review?
The new rent would still be calculated by reference to the rental valuation of the property as at
the review date.
If the rental value of the property had increased, the tenant would owe the landlord the difference
between the rent actually paid and the new rent. In addition, the tenant would most likely be
liable to pay interest on the shortfall payment.
Assignment and delayed rent review
Typically, on an assignment (sale) of a lease, the old tenant is responsible for payment of rent up
to the date of assignment and the new tenant is responsible for payment of rent from that date.
Q. What happens if a tenant takes an assignment of a lease and there is an outstanding rent review?
Usually the old tenant would be responsible for any shortfall payment (plus interest) that relates
to their period of occupation, with the new tenant being responsible for any shortfall payment
(plus interest) from the date of the assignment.
Notably, a new tenant would want to know the extent of their liabilities, particularly accurate
details of the rent, before they take on the lease.
A significant rent increase may mean that the property is no longer affordable and, of course,
could also make the lease less marketable and therefore harder for the new tenant to sell on.
Q. What should the new tenant do?
A prospective tenant should seek assurances that rent reviews are up to date.
If there is an outstanding rent review this should be flagged to the landlord before an assignment
If a rent increase is on the cards, ideally the new tenant should be allowed to have a say in any
negotiations between the old tenant and their landlord – as the new tenant would be the one paying
the new rent after the assignment has taken place!
Additionally, the old tenant should pay any shortfall relating to their period of occupation before
the date of the assignment.
If you have any other questions, please get in touch with us or call us on 01625 429131. All this
information can be found on our website www.bluntssolicitors.co.uk