Is the landlord entitled to put up the rent?
The lease may provide for rent increases or reviews during the course of the tenancy. If it does not, the rent agreed upon at the beginning of the tenancy will apply for the full length of the tenancy.
How often can the landlord review my rent?
This depends on the rent review provisions contained in the lease. The most commonly adopted norm is every 5 years but in some cases it can be every 3 years. So look at the lease to be sure. The review pattern is one item among many which are open to negotiation at the outset. There are also more unusual arrangements, such as annual indexation linked to the retail price index. It’s unusual to have a rent review in a very short lease.
How is the new rent determined?
Where there is a rent review under an existing tenancy, this will operate according to the terms of the lease. Most leases provide for a third party to determine the rent when the landlord and tenant can’t agree. This will usually involve arbitration or independent expert determination. It is advisable to obtain expert professional advice on the determination of the new rent, as this could make a big difference financially. The RICS operate a special scheme for the quick and inexpensive determination of rents at small business premises. If there is to be a new tenancy, and the landlord and tenant cannot agree on the rent, it may be fixed by the court under the Landlord and Tenant Act 1954 Part 2. Again, it would be advisable to obtain professional advice.
Do I have to accept the landlord’s proposals for the new rent?
No. If you can’t agree, either or both of you can invoke the dispute resolution procedures specified in the lease. Most leases provide for a third party to determine the rent when the landlord and tenant can’t agree. This will usually involve arbitration or independent expert determination. In the event of a lease renewal, you can ask the court to fix a new rent, reflecting current open market levels.
Is there a Rent Officer service for business tenancies?
No. But the RICS run a special scheme for rent reviews for small business premises.
How much will it cost me to appoint a surveyor to negotiate a rent review?
There are no recommended fee scales so it will depend on the market in the area in question. Fees can be based on an hourly rate, a fixed sum or a percentage of the rent agreed. They can also be based on a percentage of the reduction of the rent proposed by the landlord. It’s wise to discuss your requirements with your surveyor and obtain his/her Terms and Conditions of Engagement in writing before appointing him/her.
Small businesses with no more than two commercial properties in England and Wales with a rateable value of less than £10,000 pa (£15,000 pa in London) can take advantage of the RICS’s Small Business Scheme. Both parties must agree to use the scheme where the rental dispute is referred to an expert who will charge a fixed fee to cover the cost of the determination. Normally the landlord and tenant will pay no more than £500 each for this – and possibly less. For more information ring the RICS on (020) 7222 7000 and ask for the Dispute Resolution Service, or go to www.rics.org. If either party wants their own professional advice, they will need to pay for that separately.
What is the difference between taking a rent review to an arbitrator or an expert?
The functions of an arbitrator are similar to those of a judge, though the processes are less formal than those of a court. Arbitrations are governed by The Arbitration Act 1996. The arbitrator reaches a decision – which is called an “award” – after hearing evidence from the different parties. The independent expert, too, may receive evidence and listen to arguments, but also has a duty to make his or her own investigations to determine an appropriate rent.
How much will it cost me to have a rent review determined?
Apart from the RICS Small Business Scheme, it’s not possible to be specific. Each arbitrator or expert will have his/her own costs and fees, and there is the cost of any expert witnesses who may be called. There may be an award for costs and the arbitrator or expert may decide that each side should bear their own costs or that one party should pay more than the other and bear the lion’s share of the total costs.