Determining and Recording the New Rent at a Rent Review
Determining and recording the new rent at a rent review
In most rent review scenarios the landlord and tenant (or their respective surveyors) will agree the revised level of rent between themselves and they (or their solicitors) will draw up a Memorandum recording it. However, where agreement is not reached, it will be necessary for the rent to be determined by a third party in accordance with the provisions of the lease.
Determination by expert or arbitrator
The lease will set out how the third party is to be appointed and what qualifications they must possess. It will specify whether they are to act as arbitrator (a more formal and costly option) or as expert (usually a more straightforward option). If the parties cannot agree on the appointment of a third party the lease usually provides for a person to be appointed by the President of the Royal Institution of Chartered Surveyors.
The expert will receive representations from the landlord and tenant as to the open market rental value of the premises and will make a determination. The expert’s fees will be paid by the landlord and tenant, usually in equal shares or as the expert may otherwise direct. The expert’s determination is final and binding on the parties.
Rent review memorandum
Once the new rent has been agreed between the parties or determined by an expert or arbitrator, the parties should enter into a Rent Review Memorandum recording the revised rent. This is a simple one-page document. The Memorandum should be annexed to or kept with the original lease. It is an important document which the landlord will need to produce if the freehold is sold and the tenant will need to produce if it assigns the lease.