Rent is a significant business overhead for buyers of commercial leasehold properties and rent reviews can be a major headache.
The amount a tenant pays is reviewed periodically, usually every three to five years. Rent review patterns are usually agreed between the tenant and the landlord at the outset to determine how often the rent they pay will be re-examined. The pattern, which is basically there to make sure the landlord doesn't lose out if the local property market changes, is then detailed as part of the written lease.
If the two parties cannot agree on a rent the tenant may be able to apply to the Royal Institute of Chartered Surveyors for a third party to intervene.
For tenants, a key danger is that the landlord will use the review to dramatically increase the rent. Employing the services of a professional surveyor who can come up with an accurate rental valuation and fight your corner is essential.
A major sore point for tenants is that rent reviews are usually upward only. Although a few years ago the property industry introduced a voluntary code of practice for dealing with commercial leases and rent reviews, it hasn't resulted in a move away from the upward-only trend.
However, the Government has announced a review of the effects of upward-only rent reviews which could eventually lead to the phenomenon becoming a thing of the past.
"The effect of any future legislation for tenants is obvious," says Trevor Watson, a director at leisure specialist Davis Coffer Lyons. "In the event of property values declining for the kind of premises concerned, or in the immediately surrounding area, they will be able to see their rent re-appraised in line with market conditions rather than racheting upward only."
However, Watson believes it's unlikely we'll see any legislation before the next General Election, and any legislative changes are unlikely to be retrospective. Some tenants will face difficult decisions where the likely savings in rent are marginal, in which case they will need to weigh up whether it's worth the time and cost of taking disputes to arbitration with no guarantee of success.