5 yearly upward only to market rent...

Caboose

We're looking to get a sign up to a 10-year lease on a small warehouse. The landlord has a break at the 8-year point. Leases in neighbouring properties end then, and they may want to do a big refurb. With this in mind, they've lowered the rent to 66% of market rate.

This all weighs up fine for us, but we are concerned at the 5-year rent review, that they'll just up the rate of to full market rate in the area -- even if they are still undecided on what to do at the 8-year point.

Are they perfectly within their rights to do this? It would be a significant jump in rent that may be difficult to account for..

Jeremy535897

It will depend on the terms of the lease.

Grumpy_chap

Caboose said:

We're looking to get a sign up to a 10-year lease on a small warehouse. The landlord has a break at the 8-year point. Leases in neighbouring properties end then, and they may want to do a big refurb. With this in mind, they've lowered the rent to 66% of market rate.

This all weighs up fine for us, but we are concerned at the 5-year rent review, that they'll just up the rate of to full market rate in the area -- even if they are still undecided on what to do at the 8-year point.

Are they perfectly within their rights to do this? It would be a significant jump in rent that may be difficult to account for..

"Upward only" rent reviews are not unusual for commercial property.

Do the terms of the lease include any reference to the calculation basis for the review?  Sometimes there is a link to an external index of some kind.

If the lease is unclear to you, there may be people that can give better advice in the forum (I suspect that will require more information to be shared) or you may need to pay for a review by a Solicitor.

Savvy_Sue

I would definitely recommend getting any commercial lease reviewed by a solicitor with expertise in this area: if you say "can't afford it", my response is "then you definitely can't afford NOT to do so."

What you may find is that you can negotiate some terms, but you do need to understand them first!

daveyjp

How the rent review is dealt with will depend on the rent review clause.