Landlord demanding rent increase

[Richard Adams]

Hello, I am investigating this issue on behalf of a rather stressed friend so please help if you can.

Details of lease:

-He has a commercial premises lease of 5 years starting March 2002, running until Feb 2007. There is a flat above the shop that is not included in the lease.

-There is no bond.

-Current rent paid is £70 pw.This is indicated on the lease as fixed for first 2years, to have been reviewed March of every year from 2004. To his knowledge, these reviews did not take place.

-LL is demanding immediate increase in rent to £90 per week.

I have checked similar rental values in the area-this indicated around £100 is the norm.

Please give me some feedback on where the tenant stands. Is the lease legal? Can he be evicted if refuses to pay increase? If rent reviews are missed, does this mean the rent stands at that figure until the next review-regardless of the LL's demands?

If any more details required, Ill try and supply.

Many Thanks.

Rich

[Editor]

You don't give details of the lease, but providing it is not contracted out of the L&T Act your friend has security and cannot be evicted at the end of the lease. Most leases have provisions for arriving at a new rent.
There are other posts in this section which answer your rent review question.
Just because the landlord states a new rent, it does not mean that this is what you have to pay. Rent review is a process of negotiation between landlord and tenant. If you cannot agree you fall back, first on the terms of your lease - normally there are provisions for third party expert arbitration - and secondly on the courts.
You need to determine what is a true market rent. You do this by comparing similar properties in the area. Generally, this process is best carried out for you by a Chartered Surveyor.

[Tax Accountant]

You agree that the correct rental value is £100 pw and the landlord is demanding £90pw. The lease clearly includes provision for rent reviews and the landlord is clearly relying on this to ask for an increase in the rent to £90pw. In the absence of further information, it seems only reasonable that the landlord can invoke the rent review provisions from the rent review date or from any later date, but in that case not to be back-dated to the original rent review date.

It is best to avoid disputes, solicitors and courts where possible for obvious reasons.

I suggest resolve the matter between yourselves and move on. The landlord does not seem to be out of order. On the contrary, he has not insisted on rent review at every possible chance and he has only asked for a modest increase. Pay this from say a quarter after the rent review notice received by the tenant.

I am not a solicitor and also not connected to the legal profession. However, I have recently taken a commercial tenant to court and it has been very painful for both parties.

Ramnik

[Richard Adams]

OK, thanks for your comments guys-Ill have a word and see what happens.

[yeahbutno]

One thing to bear in mind here is that a commercial lease is not like a residential one in that (legally) both parties are classed as being equals - whereas in a residential letting, a tenant is viewed as a "customer". I'm sure someone can describe that far better than I can!

Obviously it's hard to say for certain without seeing the lease, but I can't see anything to suggest that the lease might be illegal, and wondered why you thought it might be?

Most commercial leases not only provide a rent review clause, but also the option to back-date it as well. In this case from the info you've given, the landlord is being perfectly reasonable in that he isn't asking for this to happen.

At the end of the day, if your friend's business is struggling to cope with the extra rent payments, which are still below the market rate, then he probably needs to take a very long hard look at the viability of the business itself. :(

Finally as others have said, your friend is certainly able to make a lower offer, and may be able to negotiate slightly less than has been suggested. If the landlord is adamant that he will accept no less, and your friend is unwilling to agree, then there should be a procedure laid out in the lease, which would usually involve appointing various surveyors at a shared cost.

[Richard Adams]

thanks for that response.

I agree that the increase is reasonable and its a matter of time before he has to succumb to it. I woondered also if, as the review is due in march whether he can hold out on the basis that that is the review date?

Rich

[yeahbutno]

I doubt it - surely the landlord would argue that he is about to invoke the review that was due in March 2005 or even 2004? I would imagine he can also trigger another review next March as well :(

[Richard Adams]

Should the tenant refuse to pay the increase in rent, where would he stand? Would it be a simple case of eviction after a time or would a courrt first look at ADR?

R

[yeahbutno]

Once again Richard, it really depends on what is written into the lease regarding rent review procedure.

Assuming it's a "standard" agreement, your friend should indeed continue to pay the existing rent, and only alter it once the new rent is agreed either by mutual consent, or by reversion to the agreed procedure in the lease. However, under those circs, the increase can normally be backdated to the point when the landlord asks for the increase (while the negotiations take place). As I mentioned earlier, the landlord could probably in theory ask for rent to be backdated to March 2004 if he wished in this case, although it doesn't look like he is going to.

A case brought by the landlord for eviction on the basis of non-payment of the rent increase before it has been agreed would be thrown out of court I would have thought (although I'm far from an expert).

That said, I really think in these circs, your friend's best course of action would be to try to negotiate a little bit less than the landlord proposes, agree the figure ASAP and get on with running his business.