A lease will very often contain provision allowing the rent to be reviewed at certain stages. Usually a review of the rent will not fall below the figure previously paid. There are mainly two types of review, a market based review and an index linked review. A market rent based review relies on rents being obtained on comparable properties which will give a range of potential rents which can then be whittled down to a final figure, whether by agreement or determination. An index linked review is a review whereby the rent automatically increases at a given date in line with inflation. Once the rent has been reviewed the lease will usually provide for a balancing payment to be made if the review date precedes the date the rent is agreed and determined being the difference between the old rent and the new rent plus interest in certain circumstances. The new rent will be documented by way of signed memorandum.

The renewal of a business lease is likely to be governed by the Landlord & Tenant Act 1954. Upon expiry of a lease the tenant is entitled to remain in the property until the statutory procedure has been concluded. Notice needs to be served by either the landlord or the tenant to invoke the renewal process. Once invoked, the ultimate decision as to whether a lease is to be granted and its terms will fall to the court to decide unless the parties can agree in the meantime. The landlord can only oppose the grant of a lease on certain grounds specified in the Act. In some situations where the landlord is successful in opposing the grant, the tenant is entitled to statutory compensation based on the rateable value of the property. The parties may choose to bypass or contract out of the statutory procedure but this must be done before any lease or agreement for lease of the building is entered into.

For advice on Rent Reviews and Lease Renewals please contact:

Glyn Evans on 01934 637911 e-mail evans@powellslaw.com or
Stephen Soper on 01934 637915 e-mail soper@powellslaw.com.

See also our Shops & Offices, Agricultural and Pubs, Clubs, Hotels & Restaurants fact sheets (PDF).