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  • COVID-19 and Your Commercial Lease: PART TWO: RENT REVIEW
News 3
22
Apr
COVID-19 and Your Commercial Lease: PART TWO: RENT REVIEW
News

DATED: 22 APRIL 2020

In the second of a four part series, Commercial Propert expert, Amy Husk looks at issues arising from a commercial lease which may affect both landlords and tenants during the COVID-19 crisis.

The rent review in most commercial leases is based on the open market rent and review dates will be set out in the lease. If a review date has recently passed or is coming up soon you may be wondering how that is affected by the COVID-19 crisis.

Timing of the review

  • Usually the lease will state that time is not of the essence for rent review clauses. This means that the review can still be carried out at any time after the review date has passed.
  • If the lease states that time is of the essence, the landlord must start the review process as soon as possible to avoid losing the right to have a review.
  • The ‘market rent’ will be assessed as at the relevant review date so there is generally no particular advantage or disadvantage, in terms of agreeing or determining the annual rent, as to how quickly the review is conducted. However, in the current situation it may be better to wait a few months for the impact on the market to be assessed; discuss the best course of action with your valuer.
  • If the review takes place at a later date, the tenant will almost certainly be obliged under the lease to pay the difference between the rent being paid and the revised rent.
  • The practicalities of a valuer inspecting the property are likely to be a challenge during lockdown. A valuer would potentially be permitted to attend a property as that work cannot be carried out from home. There would of course need to be an assessment of the risk of the valuer inspecting the inside of the property to the valuer and any others at the property and all necessary precautions would need to be taken.

Commercial Property team

Amount of revised rent

  • It is very unusual for an open market rent review to be anything other than ‘upwards only’ which means that the revised rent will either stay the same or increase on rent review, it will never go down.
  • There are likely to be challenges for valuers in assessing the market rent for review dates falling during 2020 as a result of the COVID-19 crisis. There will be questions as to at what point the crisis started to impact the market and to what extent. It is best to discuss this with your valuer and no doubt over the coming months valuers will be better placed to assess the impact on the market.
  • If the review date falls during a period when a temporary reduction or suspension has been agreed between the parties then it should be documented in the agreement as to whether the review is still intended to take place and whether any backdated rent increase is payable once the rent is agreed or determined.

For further information on this or other commercial propety issues you may be facing please contact a member of our Commercial Property team who will be able to advise you from both a landlord and tenant perspective.

To find out more about other issues concerning a commercial lease during the COVID-19 crisis, read more at:

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

Authors

Amy Husk

Senior Associate Solicitor
Commercial Property
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Our Experts

Jeremy Burke

Head of Department
Commercial Property

Amrita Bartram

Partner
Commercial Property

David Redgate

Partner
Commercial Property

Amy Husk

Senior Associate Solicitor
Commercial Property

Simon Stempien

Senior Associate Solicitor
Commercial Property

Sophie Robins

Senior Associate Solicitor
Commercial Property

Allison Simmons

Conveyancing Executive
Commercial Property

Macauley Cubitt

Trainee Solicitor
Commercial Property

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