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ADB | RENT REVIEWS |

Under the terms of most leases tenants are required to obtain landlord’s consent before making improvements and where these

are unauthorised there

can under

certain

circumstances

be

the

opportunity for the landlord incorporate these improvements review. This is a notorious area disagreement and it is important

to at of to

identify

works

that

have

been

carried

out

and

to

establish

whether these

are

an

improvement, a

repair

or

otherwise by way of an obligation contained within the lease or under the terms of the original letting.

Another modern disrepair

typical leases

is

term

within

that

for any

that is the responsibility

of

the

tenant

is

to

be

disregarded

as it is tenant

typically assumed that

has

complied

with

the all

repairing

covenants.

However,

it

is unusual for there to be an assumption that the landlord has complied with its repairing obligations and in circumstances where the landlord has a significant repairing responsibility, usually a multi-let office building, a

failure

to

have

done

so

or

to

provide good quality services affect the rental value.

can

basis of review and rent review assumptions

The lease will specify the notional

terms of the tenancy purpose of the review.

for

the

Most standard form of wording in leases specifies the review to open market rental value assuming that the property is available to be let in the open market. A number of points are typically disregarded,

a: 24 Old Burlington Street, Mayfair, London, W1S 3AW

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such as the tenant’s occupation,

above)

and there

are usually

further

assumptions

about the

goodwill,

improvements

(see

terms of the lease on which the property is let such as the length of the term, the existence of any break clauses and any other key points.

Understanding

the

implications

of

the notional term of the tenancy is particularly important. Certain aspects of these terms frequently provide the tenant with an opportunity to negotiate a reduced

headline rent.

These provisions

should always

be studied and

understood carefully against the context of the prevailing market.

One of the more complex topics to address in terms of comparable evidence in the rent review process is considering the impact of a rent free period granted on new lettings when seeking comparables. The majority of new lettings incorporate rent free periods sometimes to assist during

the fitting-out

period but

frequently as

an additional

inducement.

Typically the

rent

does not

become

payable until

anything

between

3-18 months

after the new lease commences

depending upon

the original lease

granted

and

prevailing

conditions.

In more

market

conditions,

free

rent

term

market difficult substantially

longe

r

periods are often granted as a pure letting incentive for the tenant to take the premises.

This gives rise to much debate in many rent reviews whether one should discount any headline rent achieved by apportioning the rent

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