Level 2 - Rent Review Horndean

Question 1

What were you key assumptions and disregards?

Answer 1

Assumptions:
1. Property to be let on open market by willing tenant to a willing landlord for a term of years as stated (the hypothetical term)
2. Property is fit and available for immediate occupation and use
3. All covenants observed by landlord and tenant
4. Property may be used for purpose set out in lease
Disregards
1. Any effects of goodwill on tenant’s occupation
2. Ignore goodwill attached to the property
3. Tenant’s improvements if landlord consent has been granted for the works

Question 2

Why did you prioritise OML? What did you have regard to?

Answer 2

Hierarchy of evidence – OML are considered the best piece of evidence as they are at an arm’s length transaction

Question 3

What is the hierarchy of evidence in L&T?

Answer 3

• OML
• LR
• RR
• IE
• Arb

Question 4

You said you looked at lease details, what sort of things did you look for? What would impact value?

Answer 4

• I looked in the Rent Review Clause to confirm the basis of review (Open Market Rent, RPI, Fixed increase)
• FRI - could mean a higher rent
• User Clause - a restrictive use clause may limit demand, reducing rental value
• Alienation Provision - if a tenant cannot assign or sublet, the less may be less attractive, reducing value
• Security of Tenure - If the lease includes security of tenure, the tenant has renewal rights potentially increasing value
• Break clauses
• Service charge

Question 5

For the purposes of a rent review how do you analyse incentives and why?

Answer 5

In commercial rent reviews, analysing incentives is key to understanding the true net effective rent achieved in comparable transactions, which helps ensure an accurate assessment of Market Rent. You assume 3 months fit out period for an occupier. So you take 3 months off any rent free period on comps.

Question 6

What was the difference in their quoting rent and your final position?

Answer 6

£3psf

Question 7

What are the key elements of a RRM?

Answer 7

• Names of Landlord and Tenant
• Address of the Property
• Date of the lease and rent review
• Confirmation of new rent
• Signed and Dated by both parties

Question 8

What are deeming provisions in a rent review?

Answer 8

Some rent review clauses in older leases required the landlord to specify the rent in the trigger notice.
The clause will state that if the tenant does not serve the appropriate counter-notice within a specified time, the tenant will have deemed to accept the new rent.

Question 9

What was your key evidence on the estate?

Answer 9

Large estate with circa. 30 occupiers. Key Evidence: Wolseley Plumb & Parts Lease renewal (May-24) - £13.05 – Next door unit – upward adjustment for effluxion of time

Question 10

Can you talk me through this example?

Answer 10

Represented a tenant in a rent review for industrial premises in Horndean.

Reviewed the lease and legal documents to determine:

Rent review date

Basis of valuation

Assumptions and disregards

Conducted a property inspection.

Gathered and analysed comparable evidence from similar industrial units, focusing on open market lettings.

Spoke with agents to verify transaction details (e.g. date, incentives, lease terms).

Challenged the landlord’s proposed rent increase with evidence.

Negotiated with the landlord’s agent.

Achieved a rent review outcome aligned with the tenant’s position on Market Rent.

Drafted and circulated a rent review memorandum as per lease requirements.