How a commercial rent review can help you negotiate with your landlord

If you lease a commercial property, you’ll know that some landlords may inflate a property’s rental value and charge more than the property is really worth. But did you know that there’s a formal way to challenge the landlord’s proposed rent and ensure you’re paying a fair market rent? That formal process is known as a ‘rent review’.

How do rent reviews work?

A rent review can be used for any type of land or commercial building, and is recommended anytime you renew a lease or take on a new lease. In a nutshell, you appoint a chartered surveyor to assess the property in line with professional valuation standards and current market conditions to gain an accurate picture of its rental market value. You’ll then receive detailed information about the value of the lease, which you can use in negotiations.

It’s not just tenants that can request a rent review – landlords may also appoint a surveyor to conduct a rent review. Say, for example, a landlord feels their property is undervalued at present, they may want a rent review to justify a higher rental value when the lease is up for renewal.

Typically, commercial rent reviews are carried out every three to five years, but your lease agreement may outline more frequent reviews. Be certain you know what you’re agreeing to before you sign on the dotted line.

Making sure you’re paying a fair rent

When you understand a property’s correct rental value, it puts you in a stronger negotiating position:

  • You can be sure you’re not overpaying, before you agree to a new lease or lease renewal.
  • In the event of a dispute with your landlord, you can use the rent review as proof of the property’s current market value.
  • You can set out any factors that may lower the property’s market value, such as maintenance issues or external influences – and these factors will be supported by the rent review.
  • You can also budget accurately, and keep your operational costs to a minimum.

At Perry Hill Chartered Surveyors, we act as commercial rent review surveyors for tenants or landlords who need a rent valuation they can trust. Our experienced surveyors are certified by RICS, the Royal Institution of Chartered Surveyors, meaning you will always receive an accurate, fair rent review. Discover more about our commercial rent review service.

Landlords, when did you last do a rent review on your commercial properties?

In our experience, many commercial landlords forget about doing a regular rent review. It’s an easy thing to overlook – particularly when a property is being leased to a stable, long-term tenant – but neglecting the rent review can cost you money in the long term.

What’s involved in a commercial rent review?

In simple terms, a chartered surveyor will assess your property, compare it to other similar commercial properties in the same area, and provide a report on the property’s current rental market value. The rent review can then be used to ensure the rent is set at the proper market rate, and to support lease negotiations.

How often you conduct a rent review will depend on what’s set out in your commercial lease agreement, but every three to five years is a good rule of thumb. Certainly any time a lease is due for renewal, you should carry out a rent review before negotiating the new lease with tenants.

Understanding the benefits of regular rent reviews

A rent review will help you establish the correct market rental value of your property, which means:

  • You’ll be able to increase the rent every three to five years, depending on inflation and market conditions.
  • You’ll have the assurance you need to tackle lease renewal negotiations with confidence.
  • You’ll be enhancing the value of your property and protecting your investment.
  • In the event of a dispute with your tenants, you’ll have proof of the accurate value of the property.

Professional standards for rent reviews

Whenever you’re negotiating a lease with tenants, both you and your tenants will have different objectives in mind; you’ll obviously want to maximise your investment, while the tenant (rightly) wants to make sure they’re not paying over the odds. A professional rent review – one that’s conducted in line with international valuation standards – ensures that the rent is fair and accurate, thus paving the way for smooth, successful negotiations.

At Perry Hill, our team of RICS-qualified chartered surveyors has a wealth of experience helping landlords with all aspects of commercial rent reviews and valuation – including for pension funds, trusts, charities and local authorities. Serving Surrey and the South East, our trusted rent review service can be used for any type of land or commercial building. Ask us about enhancing the value of your asset with a commercial rent review.

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