Vertex Law

The answer will be in your lease. If your lease is for a relatively short term, say less than four years, then no rent review provisions will be contained in the lease. As a result the rent payable at the start of the lease will not change during the lease term. 

If your lease is for four or more years then it will probably include provisions which allow the rent to be reviewed, generally in every third or fifth year of the lease term. Once you know the review date, you must adopt a reminder system giving you advance warning of an impending rent review. 

The three most common methods of rent review are an open market review, a Retail Price Index (RPI) review and a ‘linked’ rent review. Open market is the most common method, with both parties, usually via their agents, agreeing on what is considered to be the rent payable on the open market for your practice’s premises.

Those reviews classified as RPI are relatively straightforward as the old rent is simply multiplied by the relevant RPI figure. However, where RPI is the preferred method of rent review, it is likely that it will be applied more frequently during the term of the lease and often the rent review will take place each year.
 

A small minority of leases include rent review provisions linking the revised rent to the performance of the practice. Known as ‘linked’ reviews, these procedures rely on the disclosure by the tenant of relevant information. 
 

If your lease contains a rent review with reference to the RPI or another method of ‘linked’ review then the rent review provisions in the lease will clearly set out the timings and process involved. 

Commercial leases often provide that the revised rent can be agreed during the six months leading up to a review date. If the revised rent has not been agreed by the review date then the passing rent usually continues until the revised rent has been agreed.
 

Most leases allow the rent review process to continue indefinitely during the lease term.  In some cases the parties to a lease can still be arguing over the revised rent several years after the review date has passed. Such a situation rarely favours the tenant because commercial leases usually state that the tenant will pay the difference between the passing rent and the revised rent from the review date until the date on which the rent is agreed together with interest – usually the base rate – on the balancing figure.
 

A good chartered surveyor will prove invaluable in any rent review negotiations and could save you considerable time and money. A surveyor will assess the likely level of the revised rent, based on rents payable in similar practices in similar locations, called ‘comparables’. Once they have arrived at an open market rental figure you will be in a much stronger position to either initiate the rent review process yourself or respond to any revised rent proposal made by the landlord.

It may well be that the agent decides, based on comparables, that there is no justification for any increase in the passing rent. 

If you wait for your landlord to make revised rent proposals then, in most cases, the revised rent proposed is significantly higher than the passing rent. Without a surveyor’s advice it is much harder to negotiate the revised rent back down to a realistic level. 

If you pre-empt the process by proposing a reasonable figure of your own then the landlord may well accept to save the trouble of contesting it.

If agreement on the revised rent figure cannot be reached between you and your landlord (and your respective agents) then commercial leases usually provide for the rent to be determined by an independent expert or arbitrator who will hear both parties.

Once agreement is reached, or a determination made, in respect of the revised rent both parties should sign a rent review memorandum, as evidence of the agreement.

Passing rent – the rent payable immediately prior to any rent review.

Revised rent – the rent payable immediately after the rent review has been concluded. 

Review date – the date on which the rent is due to be reviewed. There may well be more than one review date if the lease is for a term of six or more years.

For advice in relation to agents/surveyors in your area who can assist in respect of rent review, visit The Royal Institution of Chartered Surveyors
 

Vertex Law specialises in providing legal services to healthcare clients. It is based at 23 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4UA. For more information contact Glenn Godfrey or call 01732 224000.
 

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