Steve Smith takes a look at how current market conditions are affecting rent reviews
Posted on 28 January 2016.
Over the past 7 / 8 years rent reviews have been uncommon due to stagnant market conditions and the downward pressure on rents.
However, as the market continues to improve, rent reviews are becoming increasingly important and achievable for landlords, and therefore more of a concern for tenants. A combination of the lack of supply of new units coming to market and rising current demand has led to an increase in rents for industrial properties. As a consequence, rent reviews are increasingly being triggered and we are now experiencing significant uplifts arising from negotiations for rent reviews and lease renewals.
In a market when rent reviews are more common, it is vital to pay attention to the quality of the terms and wording of the lease as this will directly affect what can be achieved at review. Considerations such as the length of the lease, repairing and maintenance conditions and analysis of tenant incentives can all play a part.
At Neil Mason Associates, we undertake a considerable amount of Lease Advisory work acting on behalf of both Landlords and Tenants starting from negotiations over the important terms and wording of the lease through to advice at the end of the term, including break options, to ensure the client can continue business with the minimum of disruption.
In addition, expert advice from a specialist building surveyor and sound financial planning at the outset can go a long way to offset unwelcome surprises. Dilapidations, the costs that the tenant must pay at the end of the lease to put the property back to an acceptable state, can frequently be a shock to the tenant who might not have had a strategy in place to maintain the building according to the lease conditions.
Any client entering into a new lease, whether Landlord or Tenant, should have a Schedule of Condition drawn up, agreed and appended to the lease to avoid the potential for significant financial loss when dilapidations arise at the end of the term. The Schedule of Condition provides an accurate report of the condition of the entire demise at the start of the lease and means that on termination of the lease, the tenant cannot be required to put the property into any better condition than that recorded in the schedule of condition.
Our building surveying team, headed by Tony Young, is well versed not only in providing Schedules of Condition, Dilapidation Assessments and reviewing schedules of dilapidation but also in negotiating to achieve a fair and accurate settlement, whether acting for the landlord or tenant.
For more information and advice, call Steve Smith or Tony Young on 01604 799010.