Rent review

Does the rent review system need a rethink?

By Trevor Watson from Davis Coffer Lyons

- Last updated on GMT

Fair rent reviews will be even more important when the new business rates take effect
Fair rent reviews will be even more important when the new business rates take effect

Related tags: Rent review, Renting

The rent review process came under scrutiny from senior decision makers of the licensed property trade at last week's Henry Stewart Leisure and Licensed Property Conference, where many operators suggested the current system was failing.

In a debate moderated by Kate Nichols of the ALMR (Association of Licensed Multiple Retailers) and Anthony Alder of AG&G (Alder Grimes Gooderham), many voices around the room mirrored my sentiments in giving a robust defence of the current process.

However, it was generally agreed that although the current system itself is not fundamentally flawed, some aspects of the current process warrant further consideration. Many in the room were of the view that upward-only rent review provisions needed to be further addressed.

The debate also highlighted how RPI (retail price index) and turnover rents could help operators and landlords mitigate against possibly adverse open-market rent reviews.

It is imperative that the industry continues to make opportunities to debate this subject in a public forum, as much has been said over recent years about the shortcomings of the rent review system. In my observation, these generally emerge in recession and become less of an issue in rising markets. 

There is no doubt that rapidly rising rents, as well as premiums, are indeed putting severe pressure on some operators at rent review in strong London and provincial markets. But the rent review process, albeit not perfect, is in my view reasonably effective.

If an operator is unhappy that a recent letting of a neighbouring property will create high comparable evidence (or indeed payment of a large premium), the best way to meet this challenge is to deploy the best possible expert advice. There may well be good reasons why the comparable is worth a lot more than your property. Equally as important is to ensure that you have an arbitrator or third ­party expert who has the necessary expertise and market involvement in order to discern between rogue evidence and market tone to ensure that comparable transactions are given the appropriate weight.

Making sure the rent is fair is going to be all the more crucial particularly in light of the Governments recent announcement of an overhaul on business rates​.

Related topics: Property law

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