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ADB | RENT REVIEWS |

of time.

It

is common

in

most

current

day

leases for

the

two

free period over a specified period

types dealt

of rent free periods with differently. Most

to be leases

now specify review is to

that the new rent at be that rent which will

be payable after the fitting-out period. If

expiry of the the rent free

period granted

on any lettings

goes beyond the

typical fitting-out

period, then the

headline rent can

be apportioned

to

reflect the

presence of

this

additional

incentive.

Some leases are drafted in a manner in an attempt to ensure the review is undertaken directly against headline figures whereby such additional incentives are not discounted from the headline rent on comparables. However, often such clauses are ineffective in achieving their aims following a number of court cases on this issue.

upwards only

The vast majority of current leases

specify

that

the

rent

shall

be

in an

upwards only

typically

at 5-yearly

reviewed direction

intervals (although occasionally 3- yearly). There is no restriction on

how

often

a

rent

review

implemented, but these are

is the

typical patterns.

The government has published a voluntary code of leasing practice for commercial properties in England and Wales in an attempt to encourage landlords to provide more flexibility in their leases to

allow

an

upward

pattern.

Typically

downwards this is

upward/downward

but

providing

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the rental does not fall below the level granted at the date of the original lease. This is rarely adopted by the landlords, however

and the majority remain upwards only basis.

on

an

is not

always beneficial

to a

tenant,

however, as a

lease

An upwards and downwards review

incorporating such provisions is inherently more valuable to a tenant and, as such, may attract a premium rental anywhere between 5-15% above prevailing market evidence for comparable upward only review structures.

key terms that affect the rent review

Break Clauses One of the most valuable characteristics to assume for a lease at review are regular tenant break options.

Break options and drafting of such clauses is a complex area and a

detailed analysis many pages.

would

run

to

In simple terms, a regular and effectively operable break clause will enhance rental value providing it is to be included within the virtual lease being reviewed. It is important to thoroughly understand the clauses to establish

this.

The structure of the break clause and any conditions attached are also important and need to be considered carefully.

Alienation Provisions

sub-let

their

lease.

The

majority

of leases allow tenants to assign

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