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Rent Reviews - How The Process Works

27th September 2011
By Richard Godden in Legal
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Within a lease for commercial premises, it is more than likely terms and conditions for rent reviews will be included. This permits a landlord to assess the sum of rent paid at regular intervals, often after every three or five years. While they are intended as a way of adjusting rent to the current market level, tenants must remain vigilant, as you may end up paying far more than was initially agreed.

Types of Rent Review.

There are a number of different approaches to rent reviews, the exact terms and conditions of which will be stipulated within the lease. The most common types of rent review include:-

1. Fixed Rental Increases.

Often known as 'upward only rent review' clauses, this approach states how much rent will increase by and when, regardless of market prices. This can be unfavourable for a tenant, as rent will never drop, even if prices in the surrounding area are decreasing.

2. Indexed Rent.

Indexed rent reviews allow the rent to change in line with an objective measurement beyond the control of those in the lease, such as Retail Price Index. This can be a more useful method - particularly for tenants - as rent is able to go both up and down.

Written Notice.

When a rent review is due to be activated, a landlord will begin the process by giving written notice to the tenant. Within this will be included a new sum for rental payments. A tenant must then provide a written reply either consenting or contesting the figure. There are often certain deadlines at play, so it is important a tenant does not delay with their response. If there is a disagreement and the deadlines passes, then the new figure will stand.

Rent Review Disputes.

If a tenant does not agree with the rent review, then negotiations with the landlord will be necessary. A solicitor specialising in commercial leaseholds will be able to assist you in this process, helping you to settle upon a deal each party is happy with. If an agreement still cannot be reached, an independent mediator will be required to help resolve the dispute.

Rent Review Memorandum.

Once an agreement has been reached, the new terms and condition of rent must be laid out in a Rent Review Memorandum. This must be signed by both landlord and tenant before being registered in the Books of Council and Session. A solicitor can help you with the necessary paperwork, explaining the technical jargon and ensuring all the required legalities are taken care of.

Legal Experts in Edinburgh.

It is essential that both landlord and tenant seek professional advice before signing a lease which includes conditions for rent reviews, as there are a number of technicalities to the process which must be fully understood. Otherwise, you may find you have sign a contract with inappropriate conditions for rent reviews. Tenants in particular should be wary, as terms for upward only rent clauses can prove to be very unfavourable.


Need specialist Edinburgh Property Solicitors?

McKay Norwell are Edinburgh Solicitors serving individual and business clients across Scotland.
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