There is something of a changing rental market and a difficulty in obtaining appropriate comparables for the purpose of undertaking the rent review exercise, primarily because of the Pandemic.
As a result, the Courts have seen an increased number of cases reaching trial due to Landlords and Tenants not being able to agree on the level of new rents payable.
The overall themes arising from these cases can be said to be:
- Retail rents have fallen considerably due to the pandemic – some as high as 20-30%, and the Court has held that no real reliance can be placed on pre-pandemic comparables.
- the Court has been recently holding that interim rent should not be based on the new rent sought, but could be based on a higher figure to reflect that market rents were higher for part of the interim rent period.
- The Court has recognised that comparables within a shopping centre location can be very difficult, given the various and different incentives offered to different tenants and other lease terms offered
- Overly restrictive use clauses can lead to reductions of rent, on rent review
- It has been an accepted argument that in view of the continuing market uncertainties that there is more of justification for a tenant’s break clause
- Similarly, if there is disagreement as to the lease term, the Court has been granting a 5 year lease term
- Not all is resolved however, as there remains uncertainty as to whether the rent on renewal should have regard to a rent-free period if the tenant is remaining in occupation.
- Turnover rents are now felt to be very difficult to justify on renewal, even where these existed prior to renewal. These are currently felt to be likely to be awarded only where the outcome will result in a rent consistent with the current market value, or where turnover rents are the established norm for the property type.
- Also, stepped rent or fixed rent increases are unlikely to be awarded, unless clear evidence that these are common in the market.
It is important to obtain expert rent valuation advice if you are considering a lease renewal and particularly if there is (or is likely to be) a difference in opinion.
For advice in connection with commercial leases, please contact our Commercial Property Team. For advice on Court and dispute related matters, please contact our Dispute Resolution Team.
This article was prepared by Anthony Fripp, a Partner in the Property department at WBW’s Torquay office. If you would like to contact him to discuss anything mentioned in this article or for any property related query, please call him on 01803 407625 or email anthonyfripp@wbw.co.uk.
WBW has offices in Torquay, Paignton, Newton Abbot, Exeter, Bovey Tracey, Exmouth, Honiton, Sidmouth, Launceston, Axminster, Chard and Seaton.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
