Rent reviews
In August 2006 Bulleys were instructed to act on behalf of a private client in connection with an outstanding rent review effective from June 2004.
The property, which was built in 1989, extends to in excess of 187,000 sq.ft. and was purchased by our client in August 2005 for approximately £8m.
Once tenant’s improvements had been reflected, the current passing rent of £680,000 per annum equated to £3.80 per sq ft. The previous owner had not initiated the June 2004 rent review and Bulleys were initially retained to advise if an increase in rent could be substantiated.
Based on comparable rental evidence in the immediate locality, the current Market Rent for the building indicated a rent in the region of £3.25-£3.50 per sq.ft. and initial impressions indicated that the property was over rented.
However, after closer examination of the rent review clause comparable rental evidence of properties in excess of 100,000 sq.ft within a 25 mile radius of the property could also be considered and if greater, the higher rate could be applied for rent review purposes.
After prolonged negotiations with the tenant’s agent who argued for a nil increase, Bulleys proceeded with the appointment of an Arbitrator by the RICS.
The outstanding rent review was ultimately settled on a “without prejudice” basis increasing the rent to £715,000 per annum and resulted in a considerable increase to the capital value of our clients’ interest. The tenant also had to pay the backdated rent plus interest from June 2004.It is always therefore worth taking advice and having a good look at other factors which may affect the rent review such as was successfully achieved in the case due to the wording in the review clause.
