Rent reviews often crop up as a query to solicitors and surveyors, whether your charity is the landlord or tenant.

As the devil is always going to be in the detail, all we can really do in this short note is highlight a number of the main issues.   If you have a problem with your existing lease, send your lawyer (or me) a copy and they can review that – if it’s going to be a brand-new lease, make sure that your lawyer and surveyor consider what follows.  Do also consider asking the Ethical Property Foundation for help

Either way, do remember that what may be appropriate for a standard commercial tenant isn’t always going to be the case for a charity

1                     Most rent reviews are still commonly what is known as ‘upwards only’. That is, at the time of each review the rent will not go down. It may stay the same but could go up.

2                     There won’t usually be a time limit on a landlord implementing a rent review.  For example, let’s say a 15 year lease with reviews every 3 years was granted in 1998.  Reviews were carried out in 2001 and 2004. Nothing happened in 2007 or 2010. At the beginning of 2013 the landlord decides to retrospectively carry out the missing last two reviews.  It might be complicated and difficult to calculate, but normally he will be allowed to do that.  When the calculation has been agreed or adjudicated on, the tenant will have to pay all the backdated increase on the rent. Most modern leases now provide for either the landlord or tenant to initiate a rent review.  It can therefore be a good idea for tenants to bring things to a head if the landlord doesn’t so that it is agreed there won’t be a rent increase at that time. This prevents the landlord coming back in years to come.

3                     In addition to paying all the backdated increase, the tenant will probably have to pay interest on that backdated rent! The convention is that the tenant will pay at whatever base rate is for this.

4                     Most leases give the landlord and tenant an opportunity to try and agree the rent directly between themselves but that if they fail an independent third party can come in and adjudicate. Should you choose an expert or an arbitrator?  The distinction is a legal one and will depend upon the type of property involved and how much rent is being charged. As a very general rule, an expert will be cheaper and quicker and is used for “simpler” properties.

5                     Rent review clauses in leases can be very complicated. One thing that gets lawyers and surveyors very excited are what are known as “assumptions and disregards”. Without going into too much detail here, those criteria may not be relevant for a charity shop for example. There may also be very little comparable evidence that the landlord and tenant (let alone a third-party adjudicator) can use as a benchmark. This of course means the charity tenant really should therefore instruct surveyors on the EPF panel with specialist expertise in charities to negotiate a rent review for them

6                     Leases can be reviewed to either what the then open market rent is (that is, what you might pay for a brand-new lease being offered at that time) or a formula may have been built in, for example increasing the rent by inflation. Older leases still make reference to RPI inflation here instead of CPI inflation. RPI inflation is generally higher than CPI! If you are a tenant agreeing a brand-new lease, seek advice as to what index is perhaps the most appropriate.

7                     Many properties have been sublet. Generally, the rent review carried out will not affect the subletting. For example, a rent set between the landlord and the head tenant will not be binding upon a sub tenant.

8                     Finally, a small thing but once a rent review has been agreed or determined by a third party it is important for the parties to formally record that. It often gets forgotten or missed but the absence of such a “memorandum” can cause difficulties in the future.