Rent Review Clauses - Beware of Tenant Traps!
Beware of rent review clauses when agreeing your new office lease.
Office tenants who are in the process of agreeing a new office lease need to be aware of some of the traps that are embedded in commercial office leases. Although the rent review process is fairly standard, there are traps that can catch out the unwary tenant. And as so often is the case, the devil is in the detail.
Whilst many tenants may be aware of what rent they are paying and how long their lease is, they may not be aware of how the rent can change, and how the revised rent is to be assessed. These factors need to be considered in your Moving Office Budget so you can be sure you have the financial viability to commit to the office lease.
A rent review usually takes place at 3-5 yr intervals, but can sometimes be increased annually by a fixed percentage. The Landlord will issue a new rent notice (based on the current office market dynamics) and the tenant then has opportunity to negotiate within a given timeframe. Hopefully agreement can then be reached, but if not an independent Valuer is appointed - then the decision is usually final.
Here are a few practical tips to help you avoid any office lease rent review traps:
- Be prepared - focus on the detail within the rent review clause when negotiating your new office lease to make sure it is in the tenant's favour.
- Make a diary note of when the rent is to be reviewed so you can take professional advice in advance of this to make sure the rent is being fairly increased.
- If a landlord issues Notice to increase / review the rent, make sure you act upon it within the designated timeframe (which are usually quite strict). Failure to do so could attract an unwelcome penal charge.
Always get a Property Agent to negotiate the office lease on your behalf and seek legal advice from a qualified Property Solicitor before signing anything.
