Rent review not agreed

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    Rent review not agreed

    Hi, We have a commercial property on which a rent review was due in May 2010. We agreed with our agent a small increase, but deferred to May 2011 because of the tenant's plea that his business was suffering from the recession. This proposal was passed to the tenant and we did not hear any more. The increase was due this May but we discovered our agent (no longer) had not progressed the review and no agreement to the proposal was received from the tenant. Now we are dealing directly with the tenant. He emailed us a month ago to say that he had never had a response from the agent regarding the rent review and what was happening. We responded saying our proposal of last year still stood and asking him to respond within 7 days. To date he has not responded, nor has he paid the insurance invoice sent to him (that was also due in May). We have proposed arbitration if he does not agree to the review, but he has still not responded (and still not paid the insurance). Where do we go now? Do we put in an application for arbitration and notify him that's what we're doing, or does it have to have his agreement? What if he doesn't pay the insurance?
    Any advice appreciated!

    #2
    The procedure you need to follow to refer the review to a third party should be set out in the lease. What does it say?

    If the increase you seek is small you do want to avoid arbitration if you can. I would write to the tenant and say that the offer you made is now only open for a further seven days. If agreement is not reached you will have to go to arbitration and if an increase is secured it will be backdated to May last year.

    Payment of the insurance premium is a quite separate issue.

    Comment


      #3
      I also assume that time is not of essence in this review? Furthermore, are you actually sure that the rent increase would take you to OMV and do you have transactional evidence to back it up?
      [I]The opinions I give are simply my opinions and interpretations of what I have learnt, in numerous years as a property professional, I would not rely upon them without consulting with a paid advisor and providing them with all the relevant facts[I]

      Comment


        #4
        Omv?

        Thanks for the reply, Lawcruncher. I have now written giving him 7 days to respond or we will seek arbitration. The lease states:

        "Such revised rent for the Review Period may be agreed in writing at any time between the parties or (in the absence of agreement) determined by the Arbitrator.
        "the Arbitrator" means a person appointed by agreement between the parties, or in default of agreement within fourteen days of one party giving notice to the other of its nomination or nominations nominated by the President on the application of either party made not earlier than six months before the Review Date or at any time thereafter."

        I've also given him 7 days to pay the insurance. Beyond that, we may just refer it to our solicitor.

        MrJohnnyB: What is OMV? And I don't understand about transactional evidence? Sorry!

        Comment


          #5
          Originally posted by selcuk View Post
          MrJohnnyB: What is OMV? And I don't understand about transactional evidence? Sorry!
          Open market value which is the value of the property if it were available on the open market.

          Transactional evidence is evidence of current deals of a similar nature on similar type property which can confirm that your proposed rent is accurate. You effectively acquire a square footage rate or in respect of shops an Zone A rate.
          [I]The opinions I give are simply my opinions and interpretations of what I have learnt, in numerous years as a property professional, I would not rely upon them without consulting with a paid advisor and providing them with all the relevant facts[I]

          Comment


            #6
            Thanks for that explanation. The agent who started the negotiations with the tenant last year advised us on the increase of £1,250 p.a. based on his investigations. His company are chartered surveyors and commercial property agents. We also agreed to defer the increase for a year in view of the economic climate and this was the proposal put to the tenant.
            Still waiting to hear from him, but look as though we may have to go to arbitration.


            Update! Post just arrived with two cheques from the tenant. One for the insurance and one for the new rent with a letter confirming the agreed rent. Result!

            Comment


              #7
              Originally posted by selcuk View Post
              Thanks for that explanation. The agent who started the negotiations with the tenant last year advised us on the increase of £1,250 p.a. based on his investigations. His company are chartered surveyors and commercial property agents. We also agreed to defer the increase for a year in view of the economic climate and this was the proposal put to the tenant.
              Still waiting to hear from him, but look as though we may have to go to arbitration.
              Then £1,250 could be best case scenario! I would be nervous of undertaking an arbitration with the cost implications, without an exact knowledge of all the range of potential figures achievable. After all rental valuation is not an exact science, and often open to interpretation as, ultimately no two properties are identical.
              [I]The opinions I give are simply my opinions and interpretations of what I have learnt, in numerous years as a property professional, I would not rely upon them without consulting with a paid advisor and providing them with all the relevant facts[I]

              Comment


                #8
                Arbitrations are jolly expensive. The arbitrator will charge a minimum of a couple of thousand pounds to determine it, and more, and costs are usually split 50:50. Arbitrators will come to their findings based on the quality of the submission so you'll generally end up spending another four figure sum having your expert write a submission and proof of evidence

                Expert determinations are however a little cheaper and costs are usually in the experts gift to award. Furthermore the expert is allowed to use his expert knowledge even if the parties do submit material for his attention, his decision is not limited to evidence put before him (or conceivably her but in 30 years' practice I havent come across a female rent review arbitrator). Get on the President's list, Girls!!

                Comment

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