How do Rent Reviews work?
A rent review is a contractual arrangement that directs how and when the rent should be reviewed. Every office lease will contain a clause about how and when the rent will be reviewed. It is important to start considering your rent review strategy about 18 months before the review date stated in your lease. If you haven’t already, make a diary note of this date now. The terms of the lease will set out how your rent review will work – and how often they will take place during the course of your tenancy.
How is the new rent calculated?
Most rent reviews will base the new rent on the 'open market rental value' at the date of the rent review – i.e. the rent the landlord could reasonably expect to receive if the premises were to be marketed. However, this is not always the case. The rent review may contain various other valuation assumptions such as what improvements you have done to the property. This is why it’s important for tenants to always seek professional negotiation advice from a Property Agent in order to settle the rent at a ‘reasonable’ level.
Upward only rent review
An upward only rent review means that the rent can never go down – regardless of market conditions. It either increases at review, or remains the same as before the review date.
Rent Review Tips:
Make a diary note of when your rent is to be reviewed. In general, you should plan 18 months ahead to give yourself the best possible chance of negotiating a favourable outcome.
Monitor the market
Keep an eye on what market rents are being achieved in your locality and ask your Property Agent for a breakdown of the sort of lease agreements being achieved. This will help you benchmark your own rent and lease terms against comparable properties.
Negotiate – hard!
Don’t take your landlords quoted rent at face value. This is merely a starting point for negotiations. Seek professional negotiation advice from a Property Agent.
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