Valuation

Background

Rent reviews allow the periodical adjustment of commercial rents to the market level current at the date of review. They take place at whatever intervals are agreed in the rent review clause(s) in the commercial lease. Rent reviews typically occur every three to five years, a frequency reflecting the general shortening of lease lengths in recent times. Traditionally UK commercial leases were granted for 20 years or more. Shorter leases of between 10 and 15 years are now more popular with landlords and tenants. The rent review clause sets out when each review will take place, the method of review, assumptions and disregards to be made when valuing the premises for the purpose of rent review, the procedure to be followed, and provisions for dealing with disputes if they arise. Revaluation in the open market is the most common method of recalculating a commercial rent at review date. When parties cannot agree a new rent, the rent review clause in the lease usually stipulates a procedure for a third party dispute resolution. Poorly conducted rent reviews can lead to financial loss, stalemate in agreeing new rents, and even termination of the lease. Valuation surveyors specialising in commercial rent reviews can act successfully on behalf of landlords or tenants in commercial rent review matters.