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Are you happy about the rent you pay on your business
property? If not, read on, because if you're going to query it
you need to do so quickly and using the right channels.
Otherwise you could be stuck with the rent your landlord sets. Luckily help is at hand. A chartered surveyor, with an
intimate knowledge of the business property market, can advise
and possibly help you negotiate a fair rent - for both you and
your landlord.
What are rent reviews?
Your lease will state when reviews happen - usually every three to five
years. It's designed to adjust the rent to the current market level at the
review date.
Can rents go down as well as up?
It depends on the lease. Some say the rent will remain the same or increase
(if market rents have increased) at the review date. This is called an
'upward only' rent review clause. Other leases will let the rent to go
either up or down, depending on market rents at the time.
Are rent reviews the same in all leases?
No. Most leases should reflect your particular the needs. If you're not sure
about the rent review clauses in your lease speak to your chartered surveyor
or solicitor.
How do rent reviews work?
First the landlord gives you written notice that the review is about to
happen. A specific figure will be quoted for the new rent. If this does not
seem reasonable, you must write and say so immediately. If you miss the
deadline for saying so you'll have to pay what the landlord is asking.
What happens if I don't agree with the new rent?
Speak to your chartered surveyor or solicitor about negotiating directly with
your landlord to agree a new rent. Above all don't ignore the problem - it
doesn't go away.
If you're still not happy check your lease. It should set out the
procedure for resolving the disagreement. Normally, it will say that you and
your landlord need to appoint an independent third party (a chartered
surveyor specialising in valuation) to decide the new rent. If you cannot
agree who that should be, the lease usually states that the president of
RICS (The Royal Institution of Chartered Surveyors) will choose someone for
you. Remember, just because a third person is involved doesn't stop you
trying to settle directly with your landlord.
Depending on what it says in your lease the independent third person may
act either as:
An 'arbitrator' - although similar to a judge, the arbitrator's process
is less formal than a court. They still hear evidence from each party and
reach a decision called an 'award'.
Or
An 'independent expert' - they too may receive evidence and listen to
arguments, but unlike the arbitrator they can make their own investigations
to work out the suitable rent and reach a 'determination'.
Using an independent third party is a fair, final, informal, relatively
quick and best of all cheap way of settling disputes about rent, without
having to go to court.
How is the new rent fixed?
The third person assesses your rent by looking at rents agreed on the
letting, rent review or lease renewal of similar properties let on similar
terms at roughly the same date. But remember that, if the rent review is
upward only, your rent will adjust to the open market rental value, only if
this is higher than your current rent.
The decision - an arbitrator's 'award' or independent expert's
'determination' - is usually given after their fees have been paid.
Who pays for the arbitrator or independent expert?
The arbitrator or independent expert will ask you and your landlord to agree
to their fees first. You can negotiate the fee but the arbitrator or
independent expert has a duty to proceed even if agreement has not been
reached.
In the case of the independent expert, both parties pay an equal share,
unless the lease says otherwise. In arbitration, the arbitrator has complete
freedom to decide who pays what. If you or your landlord feels the fees are
too high, you can challenge them in court after the rent review has been
settled.
Do the landlord and I need to be professionally represented during
these proceedings?
Not necessarily, the proceedings are fairly informal. However, expert advice
is essential, both in interpreting the precise terms of the lease (which
will have an effect on your rent) and in getting information on other
premises that may influence the level of rent. Landlords are very often
advised by chartered surveyors and may be expert in property matters
themselves. The RICS Contact Centre can give you names of local specialist
chartered surveyors.
Presenting a case to an arbitrator without professional help can be
risky. As well as presenting specific evidence of similar local rent levels
your surveyor can also give an opinion as an 'expert witness', based on
professional knowledge and judgment. Where disputes are referred to
independent experts, presenting a case may be less important because they
have to make their own investigations and use their own knowledge.
Nevertheless, it is still risky to present a case without professional help.
When does the new rent become effective?
Once the award or determination has been given, you will need to pay any
increase in the rent immediately, back dated from the rent review date, even
if that date has passed. Often, leases will state that you need to pay
interest on the increase from the review date until the date of payment.
Is an award or determination final?
Essentially, an arbitrator's award is final and binding, though in rare
cases involving points of law or misconduct by the arbitrator the High Court
has the power to set it aside. There is no right of appeal against an
independent expert's determination. However, if you can show that the award
or determination has been negligent, it may be possible to sue for
compensation by way of damages.
Are there alternative/cheaper ways to settle a rent dispute?
Yes. You can always refer the dispute to a mediator. This could produce a
quicker and cheaper solution, although the mediator would have no authority
to impose a rent upon either of the parties.
Further
information
You'll get clear, impartial, expert advice on the issues from an RICS
member. They are highly qualified professionals with the letters MRICS or
FRICS after their name, and are bound by strict codes of conduct. These are
your guarantee of their skills, integrity and depth of experience. Whatever
type of business property you have, chartered surveyors will provide you
with the right advice.
Chartered surveyors are members of RICS (The Royal Institution of
Chartered Surveyors), one of the most respected, independent organisations
for professionals in property, land, construction and related environmental
issues worldwide.
For more on how RICS members can help you, and to 'find a surveyor' near
you, contact RICS
T +44 (0)870 333 1600
contactrics@rics.org
Lines are open Mon-Fri 0830 - 1730 .
Or visit
www.rics.org/public/find_a_surveyor.html
Click here
for a quote and to instruct your survey online
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