What is a Rent Review?
A Rent Review is the mechanism enabling the adjustment of the rent on a premises to the current market level at the review date.
When do Rent Reviews usually occur?
It depends on the terms of the lease. Leases often incorporate a rent review at 3 or 5 year intervals.
Can Rents go down as well as up?
Leases prior to 28th February 2010 contain upward only rent reviews which state that the rent will remain the same or increase, subject to market conditions. If the rent review is not upward only and the market had deteriorated since the last review, the rent of the property could be fixed at a lower level than was previously being paid.
In December 2009, the Land and Conveyancing Law Reform Act banned upwards only rent reviews in new leases commencing after 28th February 2010.
Are Rent Review Clauses the same in all leases?
No and as rent review clauses are often very long and complicated, you should always take professional advice from a Chartered Surveyor when faced with a rent review. The terms of an individual lease can affect the level of rent payable.
How is a Rent Review Activated?
The rent review process is usually initiated by a notice from the landlord. A specific figure will be quoted for the new rent. If this does not seem reasonable, the tenant must write and say so immediately. The tenant is entitled to ask for the basis of this figure and request comparable evidence on which the figure is based.
In some circumstances there are strict time limits to object and if you miss these deadlines, it may mean that the tenant will have to pay what the landlord is asking for.
Both parties or their representatives will then proceed to agree the revised rent. This will be based on market evidence generated from transactions on properties that can be compared to the property under review. Factors that will impact on the level of rent.
What happens if the revised rent cannot be agreed with the landlord (or sometimes the tenant)?
If the new rent cannot be agreed, the lease will normally specify a procedure for resolving the disagreement. Usually, it will state that the parties should first try to agree on the appointment of an independent third party e.g. Chartered Surveyor specialising in valuation to determine the new rent. If the parties are unable to agree themselves a prospective third party, the lease usually provides for the appointment to be made by the President of the Society of Chartered Surveyors Ireland. The independent party will act either as an arbitrator or independent expert to determine the new rent.
The Society maintains panels of suitably qualified members which the President may consult when appointing or nominating persons to act as independent experts or arbitrators in relation to rent reviews.
The functions of the Society President under the terms of rent review clauses in leases, is strictly confined to the appointment/nomination of Arbitrators/Experts. The President will appoint a chartered surveyor with special training and experience to act as arbitrator or independent expert.
A person will not be appointed if there is a real danger of bias, but it should be realised that the arbitrator or independent expert will probably have had dealings with other properties in the area. It is in the interests of both landlord and tenant that the person appointed has the appropriate expertise.