Some years ago I was asked by a landlord to undertake a rent review of a small hotel where the passing rental was £40,000 a year. When I advised the client that I
thought the annual rental value was £130,000, needless to say, eyebrows were raised.
I am sure, as a result of negotiations at the subsequent rent review, that one of the reasons for this material difference was interpretation of which improvements to the property had, or had not, been carried out by the tenant.
During the review negotiations the tenant's surveyor produced a thorough photographic record of what the premises looked liked some 10 years earlier. He advised me that the rather smart hotel we were now dealing with had been created by his client, and that the improvements that caused the transformation were to be disregarded, as they were tenant improvements.
The matter was settled by reference to an independent expert, who determined a rental of about £130,000 per annum. This suggests that the expert agreed that what may have appeared to be substantial improvements were not, in fact, improvements to be disregarded for rental purposes.
It would be wrong for a tenant to not only pay for the improvements but also pay rent upon those improvements and ultimately be asked to reinstate the property to its former condition at the expiry of the lease. It is important, therefore, to understand what constitutes an improvement or alteration which would require landlord's consent under the terms of the lease.
Any works should be recorded as properly licensed improvements, to be disregarded at rent review and distinguished from the "normal" requirements on a tenant to maintain the premises in proper repair and decorative order. Failure to do this could mean that the landlord may be entitled to charge a rental on these works.