In 1978, I published a pamphlet "The Framework of Rent Review Clauses" which was given publicity in the leading law and property journals. To make the information more accessible for landlords and tenants, in 1983, I published a 28-page booklet ' How to do a Rent Review' - which price at £5 was an instant hit; and in a letter to me was described by Professor John Ratcliffe, then Dean of the Faculty of the Built Environment at the Polytechnic of the South Bank, London as an "excellent digest of a particular complex area of professional practice and study".
In 1988 I published a booklet "The Psychology of Rent Review Negotiation" and after that numerous pamphlets and newsletters; and over the years, my contributions to the world of rent review are such that many of my original ideas nowadays pervade popular thinking.
Please click on a title to reveal information about that topic.
1.0 Introduction
The
purpose of a rent review is to enable the landlord
to obtain the market rental that the premises would
fetch if let on the open market at the review
dates.
Rent reviews are not solely for the benefit of the landlord. The reason tenants agree to rent reviews is that without them the tenant would never get a lease for a long period of time, such as five years or more. The reason most tenants want a long lease is partly it can take time to establish a business, and also a leasehold business as a going-concern can be a saleable proposition.
Both property and lease are assets that can be bought, sold, and mortgaged. Often, the financing and salability of the tenant's business as a leasehold going-concern requires the certainty of a long term of lease. For the landlord, the longer the term of lease the easier the property can be to mortgage, also the more opportunity for investment performance.
Although short -term leases, generally five (5) years or less, are popular, especially where landlords intend or plan redevelopment, the obligations in such tenancies can create problems for tenants. A good way to make money is to start up a business from scratch, or take over an existing or an ailing business and develop it into a profitable concern, so being able to offer a certain term of lease makes the proposition more attractive to buyers and in many instances having certain term of lease can be the difference between being able to dispose of the business for a price and not receiving anything at all for it.
Rent review is at the heart of commercial property, because changes in the value of money and the value of property are reflected in the rent. Since rents fluctuate with supply and demand, any changes can also be reflected in the rent payable.
Anyone can read a lease, but knowing what to look for is what really counts. For different interpretations, it is not simply a matter of opinion, but also a matter of rent review law. Rent review law" as such does not really exist, but is within the realm of business tenancy law. To be able to negotiate a rent review successfully, it is important to have a working knowledge of business tenancy law, and for that knowledge to include a deep understanding of the many facets.
Rent reviews are not solely for the benefit of the landlord. The reason tenants agree to rent reviews is that without them the tenant would never get a lease for a long period of time, such as five years or more. The reason most tenants want a long lease is partly it can take time to establish a business, and also a leasehold business as a going-concern can be a saleable proposition.
Both property and lease are assets that can be bought, sold, and mortgaged. Often, the financing and salability of the tenant's business as a leasehold going-concern requires the certainty of a long term of lease. For the landlord, the longer the term of lease the easier the property can be to mortgage, also the more opportunity for investment performance.
Although short -term leases, generally five (5) years or less, are popular, especially where landlords intend or plan redevelopment, the obligations in such tenancies can create problems for tenants. A good way to make money is to start up a business from scratch, or take over an existing or an ailing business and develop it into a profitable concern, so being able to offer a certain term of lease makes the proposition more attractive to buyers and in many instances having certain term of lease can be the difference between being able to dispose of the business for a price and not receiving anything at all for it.
Rent review is at the heart of commercial property, because changes in the value of money and the value of property are reflected in the rent. Since rents fluctuate with supply and demand, any changes can also be reflected in the rent payable.
Anyone can read a lease, but knowing what to look for is what really counts. For different interpretations, it is not simply a matter of opinion, but also a matter of rent review law. Rent review law" as such does not really exist, but is within the realm of business tenancy law. To be able to negotiate a rent review successfully, it is important to have a working knowledge of business tenancy law, and for that knowledge to include a deep understanding of the many facets.
2.0 Market Rent
When
premises are first offered to let in the market,
how much the landlord is asking and how much the
tenant actually agrees is a matter between the
parties.
In the market, rent is a product: it does not occur naturally, as in 'this is the rent of the premises'. To value rent, all the material terms and conditions must be known, stated in advance or defined. However, because rent at a new letting is often agreed before the the lease - the document which embodies all the terms and conditions - is drafted and approved, it is possible for a completed lease to contain terms and conditions that could produce a different rent to what as agreed.
The test of efficacy is whether the rent would be identical, if there were a rent review on the same day as the term commencement. When landlords and tenants are content to let the lawyers deal with the 'small print' there is a risk the wording of the lease may not coincide with what a rent review surveyor would expect. To be on the safe side, a well-advised landlord or tenant will normally take advice from a rent review surveyor on whether the proposed wording and phrasing properly reflects the agreed rent.
In the first pamphlet I wrote about rent review, entitled "The framework of rent review clauses", and subsequently in my booklet "How to do a Rent Review", I commented on the stages of the review process. The process is designed to safeguard the interests of both parties. Although the actual landlord and actual tenant might normally be expected to make the final decisions on what rent to agree, that would only happen if the review were agreed without 'going to arbitration'. So, whereas there is nothing to stop the actual landlord and actual tenant cutting to the chase by agreeing whatever they like, the risk is the landlord might've got more and the tenant might've got less.
It is not a risk that is confined to the actual parties. Because the values of the freehold and leasehold interest(s) respectively hinge on the rent, those values could also be affected if the agreed rent differs from the market rent. For example, for a landlord £500 a year more rent might be worth approximately £5000 capital value. A tenant might agree what he can afford, only to discover afterwards that nobody else would have paid so much. So, although there is nothing to prevent the actual landlord from exercising discretion as to the amount of rent payable by the actual tenant, I am of the opinion any decision whether to accept a lower rent should be made after the rent review is agreed or assessed, not before. Otherwise, a false market would be created.
A false market challenges a principle of business tenancy law, namely the ability of the actual tenant to afford the market rent is irrelevant. By allowing rents to run wild or tapered to the needs of an actual landlord and actual tenant, the stability that might ensue will probably be short-lived and generally a location more likely to become run-down.
Generally, rising rents confirm growth, not only as regards the property and leasehold values, including salability of the tenant's business as a going-concern, but also the popularity of the location and the consequences for wider community. Be that as it may - I explore the thinking in greater detail on my website shopinvestment.co.uk - the whole of rent review process ought not to be ignored, because, as I have said, rent cannot exist in isolation of the terms of the tenancy upon which the premises are let. And, as I say "what's the point in having a lease and then not sticking to it?"
In the market, rent is a product: it does not occur naturally, as in 'this is the rent of the premises'. To value rent, all the material terms and conditions must be known, stated in advance or defined. However, because rent at a new letting is often agreed before the the lease - the document which embodies all the terms and conditions - is drafted and approved, it is possible for a completed lease to contain terms and conditions that could produce a different rent to what as agreed.
The test of efficacy is whether the rent would be identical, if there were a rent review on the same day as the term commencement. When landlords and tenants are content to let the lawyers deal with the 'small print' there is a risk the wording of the lease may not coincide with what a rent review surveyor would expect. To be on the safe side, a well-advised landlord or tenant will normally take advice from a rent review surveyor on whether the proposed wording and phrasing properly reflects the agreed rent.
In the first pamphlet I wrote about rent review, entitled "The framework of rent review clauses", and subsequently in my booklet "How to do a Rent Review", I commented on the stages of the review process. The process is designed to safeguard the interests of both parties. Although the actual landlord and actual tenant might normally be expected to make the final decisions on what rent to agree, that would only happen if the review were agreed without 'going to arbitration'. So, whereas there is nothing to stop the actual landlord and actual tenant cutting to the chase by agreeing whatever they like, the risk is the landlord might've got more and the tenant might've got less.
It is not a risk that is confined to the actual parties. Because the values of the freehold and leasehold interest(s) respectively hinge on the rent, those values could also be affected if the agreed rent differs from the market rent. For example, for a landlord £500 a year more rent might be worth approximately £5000 capital value. A tenant might agree what he can afford, only to discover afterwards that nobody else would have paid so much. So, although there is nothing to prevent the actual landlord from exercising discretion as to the amount of rent payable by the actual tenant, I am of the opinion any decision whether to accept a lower rent should be made after the rent review is agreed or assessed, not before. Otherwise, a false market would be created.
A false market challenges a principle of business tenancy law, namely the ability of the actual tenant to afford the market rent is irrelevant. By allowing rents to run wild or tapered to the needs of an actual landlord and actual tenant, the stability that might ensue will probably be short-lived and generally a location more likely to become run-down.
Generally, rising rents confirm growth, not only as regards the property and leasehold values, including salability of the tenant's business as a going-concern, but also the popularity of the location and the consequences for wider community. Be that as it may - I explore the thinking in greater detail on my website shopinvestment.co.uk - the whole of rent review process ought not to be ignored, because, as I have said, rent cannot exist in isolation of the terms of the tenancy upon which the premises are let. And, as I say "what's the point in having a lease and then not sticking to it?"
2.1 'Upward-only' rent review
Although
the purpose of a rent review is to enable the
landlord to obtain the market rental that the
premises would fetch if let on the open market at
the review dates, which could mean the rent payable
would be lower if the market rent at the review
date were also lower than the rent passing
beforehand, leases commonly include what is known
as an 'upward-only' rent review.
Strictly, there is no such thing as an 'upward-only' rent review, because it is impossible to impose subjectivity on the objectivity of the market. In other words, no-one can say for certain the rent in the market would necessarily be higher at some time in the future, So, 'upward-only' rent review does not mean the rent must definitely increase, but that the rent payable after the review will not be less than the rent payable beforehand.
Where the passing rent - namely the payable before the review - was the result of a pre-agreed series of increases, it is important for the rent review memorandum, which documented the previous review, to make it clear that, for purpose of the next review, the rent passing would be the average rent during that period.
For example, let us assume the last review were in March 2005 when it was agreed that the rent for year 1 of the 5 yearly-review period would be £20,000 pa, for years 2 and 3 £22,500 pa and for year 4 and last year of the review period £25,000 pa. That means the rent passing for the March 2010 review would be £25,000 pa. So, if the market rent were £23,000 pa then £25,000 pa would continue to be payable, per the upward-only review provision. However, if the 2005 review memorandum had stated that the minimum rent for purpose of the 2010 review were the average of those increases, or more simply the actual average rent was stated, then the rent for purpose of the upward-only review clause at the 2010 review would be £23,000 which means that the rent payable after the March 2010 review would be £23,000 pa (and not £25,000 pa).
With an 'upward-only' review and where the market rent is lower, it is common for the review to be described as 'nil increase' and for the review memorandum to document the passing rent as the market rent and for the wording of the memorandum to say the rent has been agreed or assessed in accordance with the lease. Strictly, that is incorrect: it is only the market that should be documented at a review, but because many people are more interested in commercial expediency, they are content to add what could be considered a falsehood to the growing body of evidence. What a casual approach does is give the impression of a higher rent at the review than it was in practice. When the rent previously passing is not disclosed, anyone relying on the agreement as evidence could be misled.
Strictly, there is no such thing as an 'upward-only' rent review, because it is impossible to impose subjectivity on the objectivity of the market. In other words, no-one can say for certain the rent in the market would necessarily be higher at some time in the future, So, 'upward-only' rent review does not mean the rent must definitely increase, but that the rent payable after the review will not be less than the rent payable beforehand.
Where the passing rent - namely the payable before the review - was the result of a pre-agreed series of increases, it is important for the rent review memorandum, which documented the previous review, to make it clear that, for purpose of the next review, the rent passing would be the average rent during that period.
For example, let us assume the last review were in March 2005 when it was agreed that the rent for year 1 of the 5 yearly-review period would be £20,000 pa, for years 2 and 3 £22,500 pa and for year 4 and last year of the review period £25,000 pa. That means the rent passing for the March 2010 review would be £25,000 pa. So, if the market rent were £23,000 pa then £25,000 pa would continue to be payable, per the upward-only review provision. However, if the 2005 review memorandum had stated that the minimum rent for purpose of the 2010 review were the average of those increases, or more simply the actual average rent was stated, then the rent for purpose of the upward-only review clause at the 2010 review would be £23,000 which means that the rent payable after the March 2010 review would be £23,000 pa (and not £25,000 pa).
With an 'upward-only' review and where the market rent is lower, it is common for the review to be described as 'nil increase' and for the review memorandum to document the passing rent as the market rent and for the wording of the memorandum to say the rent has been agreed or assessed in accordance with the lease. Strictly, that is incorrect: it is only the market that should be documented at a review, but because many people are more interested in commercial expediency, they are content to add what could be considered a falsehood to the growing body of evidence. What a casual approach does is give the impression of a higher rent at the review than it was in practice. When the rent previously passing is not disclosed, anyone relying on the agreement as evidence could be misled.
2.2 Alternatives to market rent
Some
leases contain rent reviews that are not assessed
by reference to market rent (alone), but upon
formulae agreed when the lease was granted.
Before the early 1970s, when inflation became an issue, pre-set increases at fixed intervals were the norm: for example term of 21 years at £500 per annum (a year), rising to £550 pa at the 7th year, rising to £600 pa at the 14th year. Even where reviews were to market rent alone, the interval would have been long-dated, for example term of 99 years with rent reviews every 21 years.
Indexation is not unusual, where the rent on review is either be the market rent, or the difference between the RPI (retail price index) (or some other index) at the review and start dates, whichever the greater.
Annual uplifts of a pre-agreed percentage can be found, especially where the lease came into being from capital-raising, such as a leaseback where the seller sells the freehold and immediate takes a lease of the property from the buyer. Sometimes, percentage uplifts also have reviews to market rent after a certain time so as to ensure the uplift is not out of line with the market rent.
The basis upon which the rent review is to be assessed will be stated in the lease. Although landlord and tenant can agree to not base their agreement on the market rent, what one party cannot do is to impose on the other something different to the basis that is stated in the lease.
Before the early 1970s, when inflation became an issue, pre-set increases at fixed intervals were the norm: for example term of 21 years at £500 per annum (a year), rising to £550 pa at the 7th year, rising to £600 pa at the 14th year. Even where reviews were to market rent alone, the interval would have been long-dated, for example term of 99 years with rent reviews every 21 years.
Indexation is not unusual, where the rent on review is either be the market rent, or the difference between the RPI (retail price index) (or some other index) at the review and start dates, whichever the greater.
Annual uplifts of a pre-agreed percentage can be found, especially where the lease came into being from capital-raising, such as a leaseback where the seller sells the freehold and immediate takes a lease of the property from the buyer. Sometimes, percentage uplifts also have reviews to market rent after a certain time so as to ensure the uplift is not out of line with the market rent.
The basis upon which the rent review is to be assessed will be stated in the lease. Although landlord and tenant can agree to not base their agreement on the market rent, what one party cannot do is to impose on the other something different to the basis that is stated in the lease.
3.0 Tenancy or Lease
Although it's common to refer to a tenancy as a
lease, in fact the lease is simply the document,
and which the original parties (the first landlord
and the first tenant) signed for a tenancy.
Sometimes, tenancies are not in writing: oral
tenancies... (to be continued)
A business tenancy is a commercial contract and, with a commercial contract, the parties are deemed in law to know what they are doing. Business tenancy law is not interested in the wider consequences for the parties, but simply in operation and enforcement of the law. Because of the commercial intention of a business tenancy, the parties are free to agree whatever terms and conditions they like regardless of the law, but that does not mean all the provisions would necessarily be enforceable.
In practice, there is no standard form of lease in use generally. One cannot buy a ready-made document and simply fill in the blanks with the names of the parties, the rent, and so on and expect that to cover every eventuality. Although, for particular requirements, many landlords and tenants have their own wording, and the Law Society has produced its own standard document commonly used in unsophisticated situations, and whereas it might sound like a good idea to design a document that everyone anywhere could use, it would probably have to comprise hundreds of pages to be sure every single thing thought of. In any event, even if such a document could be created, the parties would still have to check it thoroughly to make certain every single word and phrase properly recorded their intentions. Since that could take an inordinate time, it is generally cheaper to draft and approve each document from scratch and include many of the standard wording for clauses that are generally acceptable.
A business tenancy is a commercial contract and, with a commercial contract, the parties are deemed in law to know what they are doing. Business tenancy law is not interested in the wider consequences for the parties, but simply in operation and enforcement of the law. Because of the commercial intention of a business tenancy, the parties are free to agree whatever terms and conditions they like regardless of the law, but that does not mean all the provisions would necessarily be enforceable.
In practice, there is no standard form of lease in use generally. One cannot buy a ready-made document and simply fill in the blanks with the names of the parties, the rent, and so on and expect that to cover every eventuality. Although, for particular requirements, many landlords and tenants have their own wording, and the Law Society has produced its own standard document commonly used in unsophisticated situations, and whereas it might sound like a good idea to design a document that everyone anywhere could use, it would probably have to comprise hundreds of pages to be sure every single thing thought of. In any event, even if such a document could be created, the parties would still have to check it thoroughly to make certain every single word and phrase properly recorded their intentions. Since that could take an inordinate time, it is generally cheaper to draft and approve each document from scratch and include many of the standard wording for clauses that are generally acceptable.
4.0 Guidelines for Rent Review
With
a new letting, how much rent the tenant agrees will
be based upon what the tenant can afford. How the
tenant calculates that figure depends on its
expectations for the turnover and profitability of
the business at the premises. To make sure its
calculations are not out of line, the tenant may
check what other tenants nearby are paying for
their premises.
As soon as the lease is completed, affordability and business tenancy law part company. With a new letting, the landlord can dictate terms, including being able to wait as long as he likes for a tenant to pay what the landlord would accept. Whether the tenant has any bargaining power would depend upon the level of demand and supply, the state of the market and the landlord's investment policy.
As soon as a new lease is completed, the market cannot be tested because the tenant has a lease, which means the landlord is not able to offer the premises for occupation to let with vacant possession. Consequently, the only way to assess the market rent at rent review is to include guidelines in the lease for how to arrive at the market rent and what to do if the parties cannot agree.
The market rent is what the others landlords and other tenants would reasonably expect, as distinct from how much the actual landlord would agree or the actual tenant could afford. However, the guidelines do not necessarily result in the landlord getting as much rent as might be wanted, or the tenant could afford. Because what the guidelines do is to detach the assessment of rent from the host of subjective factors that the actual landlord and the actual tenant might have in mind, and instead provide a set of objective factors for the sort of terms of tenancy and whatever else the market would want for the rent in the market.
Every lease contains guidelines for the assessment of a rent review, but because there is no standard lease, review guidelines will differ. Depending on the experience of the original parties and/or the date of the lease, the wording of guidelines may be detailed, vague or ambiguous. Also, because any documents such as licences, deeds of variation, side-letters can be associated with the lease, the wording in those associated documents can affect the review guidelines.
As soon as the lease is completed, affordability and business tenancy law part company. With a new letting, the landlord can dictate terms, including being able to wait as long as he likes for a tenant to pay what the landlord would accept. Whether the tenant has any bargaining power would depend upon the level of demand and supply, the state of the market and the landlord's investment policy.
As soon as a new lease is completed, the market cannot be tested because the tenant has a lease, which means the landlord is not able to offer the premises for occupation to let with vacant possession. Consequently, the only way to assess the market rent at rent review is to include guidelines in the lease for how to arrive at the market rent and what to do if the parties cannot agree.
The market rent is what the others landlords and other tenants would reasonably expect, as distinct from how much the actual landlord would agree or the actual tenant could afford. However, the guidelines do not necessarily result in the landlord getting as much rent as might be wanted, or the tenant could afford. Because what the guidelines do is to detach the assessment of rent from the host of subjective factors that the actual landlord and the actual tenant might have in mind, and instead provide a set of objective factors for the sort of terms of tenancy and whatever else the market would want for the rent in the market.
Every lease contains guidelines for the assessment of a rent review, but because there is no standard lease, review guidelines will differ. Depending on the experience of the original parties and/or the date of the lease, the wording of guidelines may be detailed, vague or ambiguous. Also, because any documents such as licences, deeds of variation, side-letters can be associated with the lease, the wording in those associated documents can affect the review guidelines.
5.0 Comparison
At
rent review, the market rent is based on
comparison. However, what is known as 'comparable
evidence' is not only the rent that others
landlords and tenants have agreed for other
premises, but also the terms and provisions of the
leases upon which those other premises are let.
If you focus only on the actual rent paid elsewhere, without taking into account or adjusting for the many differences in the lease(s) of those different premises, then you would arrive at the wrong conclusion.
Also, because every word has a positive and negative connotation, a different interpretation or a subtle turn of phrase can result in a different outcome, which for landlord will often mean more rent that the market would otherwise pay, and for the tenant a substantial saving to below the market rent.
If you focus only on the actual rent paid elsewhere, without taking into account or adjusting for the many differences in the lease(s) of those different premises, then you would arrive at the wrong conclusion.
Also, because every word has a positive and negative connotation, a different interpretation or a subtle turn of phrase can result in a different outcome, which for landlord will often mean more rent that the market would otherwise pay, and for the tenant a substantial saving to below the market rent.
6.0 Legislation
At
rent review, the law consists of some legislation
and volumes of case-law, decisions of the courts as
a result of disputes often going back years
regarding the interpretation of the construction of
documents, and the application of
legislation. Case-law does not necessarily set
a precedent, it may only provide one, because every
case is a question of fact and degree, and any one
reported case is no more than a guideline to what
the decision will be in different
circumstances.
The principal legislation is:
Landlord and Tenant Act Act 1954 Part II
Landlord and Tenant Act 1927
(to be continued...)
The principal legislation is:
Landlord and Tenant Act Act 1954 Part II
Landlord and Tenant Act 1927
(to be continued...)
7.0 Proposal for Rent
In
principle, a rent review to market rent is for the
benefit of both parties, so it is not necessary for
a rent to be proposed to start with , although
generally it would be; and in many instances the
procedure for the review includes a requirement for
the landlord to propose the rent.
If a proposal is not made then how could the parties assess the rent? The answer is that if you do not know how to answer that question then you should ask someone that does. At rent review, the likely rent is not normally tested in the market. (Even when that is possible, with the tenant's co-operation, the result can be wrong because the actual tenant is likely to have some involvement in the matter, through having a tenancy in force.) Instead, the likely rent in the market (namely what other landlords and other tenants would agree) would be interpreted by surveyors based on their opinions, and knowledge of the market, including any comparable evidence.
Strictly, it is not necessary for a surveyor's opinion of rental to be supported by evidence. Evidence can only be of what others have agreed for other premises. Since all premises and tenancies are different in some way, somewhere along the way it is necessary for surveyors to make an informed guess or estimate in order to arrive at the market rent. If that were not done then two things could happen: firstly, rents would never change if there were no evidence, and secondly (to be continued)
If a proposal is not made then how could the parties assess the rent? The answer is that if you do not know how to answer that question then you should ask someone that does. At rent review, the likely rent is not normally tested in the market. (Even when that is possible, with the tenant's co-operation, the result can be wrong because the actual tenant is likely to have some involvement in the matter, through having a tenancy in force.) Instead, the likely rent in the market (namely what other landlords and other tenants would agree) would be interpreted by surveyors based on their opinions, and knowledge of the market, including any comparable evidence.
Strictly, it is not necessary for a surveyor's opinion of rental to be supported by evidence. Evidence can only be of what others have agreed for other premises. Since all premises and tenancies are different in some way, somewhere along the way it is necessary for surveyors to make an informed guess or estimate in order to arrive at the market rent. If that were not done then two things could happen: firstly, rents would never change if there were no evidence, and secondly (to be continued)
8.0 Starting the procedure
(to
be continued)
8.1 Valuation Date
(to
be re-written)
Term is the duration of the period of the tenancy.
The commencement date of the term is not necessarily the date of the lease. The date of the lease is normally when the lease was completed. It is not unusual for the commencement date of the term to differ from the date of completion of the lease.
The frequency of rent review intervals is often calculated by reference to the term, so the date of the rent review(s) can depend on the commencement of the term. For example, a term of 15 years commencing 1 January 2010 with 5 yearly rent reviews means the first rent review is on 1 January 2015 and the second review on 1 January 2020.
In some leases, there may be provision for a rent review on or a few days before the expiry of the term.
The term starts at midnight on the commencement date and ends at midnight on the expiry date. Although both times are momentary, the expiry of a term is probably important because a landlord cannot require vacant possession of the premises before midnight, and the tenant does not have to give up vacant possession until midnight.
A difference exists between the contactual term and the period of occupation after expiry of the tenancy. This website is only concerned with rent review law, not expiry and renewals so it is outside the scope of this information. Suffice it to say the only material significance of the difference is whether there is any evidence at the review to suggest the tenancy would not be renewed by the landlord at the end of the contractual term.
When the tenancy is outside the Landlord and Tenant Act 1954 (s.24-s.28 exclusion), the tenant would have no lawful rights to remain in occupation after expiry of the contractual term.
Term is the duration of the period of the tenancy.
The commencement date of the term is not necessarily the date of the lease. The date of the lease is normally when the lease was completed. It is not unusual for the commencement date of the term to differ from the date of completion of the lease.
The frequency of rent review intervals is often calculated by reference to the term, so the date of the rent review(s) can depend on the commencement of the term. For example, a term of 15 years commencing 1 January 2010 with 5 yearly rent reviews means the first rent review is on 1 January 2015 and the second review on 1 January 2020.
In some leases, there may be provision for a rent review on or a few days before the expiry of the term.
The term starts at midnight on the commencement date and ends at midnight on the expiry date. Although both times are momentary, the expiry of a term is probably important because a landlord cannot require vacant possession of the premises before midnight, and the tenant does not have to give up vacant possession until midnight.
A difference exists between the contactual term and the period of occupation after expiry of the tenancy. This website is only concerned with rent review law, not expiry and renewals so it is outside the scope of this information. Suffice it to say the only material significance of the difference is whether there is any evidence at the review to suggest the tenancy would not be renewed by the landlord at the end of the contractual term.
When the tenancy is outside the Landlord and Tenant Act 1954 (s.24-s.28 exclusion), the tenant would have no lawful rights to remain in occupation after expiry of the contractual term.
8.2 Notices
9.0 Lease Analysis
10.0 Negotiation
10.1 Negotiation: the Landlord's Approach
10.2 Negotiation: the Tenant's Approach
11.0 Dispute Resolution (known as 'going to arbitration')
12.0 Recording the agreement
13.0 Paying the revised rent (plus interest, if any)
14.0 Costs and Fees
14.1 Calderbank offer
A Calderbank (from Calderbank v Calderbank [1975])
is a 'without prejudice' offer to settle to avoid
costs.
It can be made by either party and more than one Calderbank offer can be made during the course of the matter. The amount of offer does not have to be the lowest a landlord would accept or the highest a tenant would make.
The offer is not disclosed to the arbitrator or independent expert (if the independent expert has jurisdiction on costs) before the award or determination is released.
The general rule is that costs follow the event, unless there are circumstances otherwise, so if the award or determination were higher or lower than the Calderbank offer then the party making the offer could have costs award in his favour.
It can be made by either party and more than one Calderbank offer can be made during the course of the matter. The amount of offer does not have to be the lowest a landlord would accept or the highest a tenant would make.
The offer is not disclosed to the arbitrator or independent expert (if the independent expert has jurisdiction on costs) before the award or determination is released.
The general rule is that costs follow the event, unless there are circumstances otherwise, so if the award or determination were higher or lower than the Calderbank offer then the party making the offer could have costs award in his favour.
To contact me, please telephone 01531 631892 or email help@michaellever.co.uk
I look forward to helping you in some way.
Michael Lever