Level 3 - Kitts Green Rent Review Flashcards
Who were the occupiers / key comp?
Passing - £4.00 psf
Occupiers on the estate: Eskimo Products Ltd, Platinum Trade Frames, Machinery Logistics Ltd
£8.00 psf – unit on the estate
£6.75 psf – Settlement
What are the risks and costs associated with going to third party? How much would if have cost your client to go to third party?
Risks of going to third party include: Loss of Control, Costs Awarded against you, Time delays, can turn the landlord tenant relationship a bit sour
Arbitrators fees: hourly rate can be £250-350 per hour can go up to £500
Would you have preferred an arbitrator or an independent expert?
I was acting for the LL and the market was rising I would therefore have preferred an independent expert.
In court Arbitrators are only able to rely on evidence which is completed. Independent Experts are allowed to consider other evidence.
What is a Calderbank offer?
Final negotiating position, genuine offer to settle
What is the key purpose of a CB?
The key purpose of a Calderbank offer is to protect the offering party’s position on costs if the case proceeds to a tribunal or court and the opposing party fails to achieve a better outcome.
What is included in a CB offer?
Without prejudice, saves as to costs
Offer Details including Rent being offered, time limit to accept (21 days)
How did you determine for Kit Green that your third-party determination was to be an arbitrator?
Detailed within the rent review clause
Would you have preferred it to be an arbitrator or an independent expert and why?
I would have preferred an independent expert because they aren’t bound by the evidence we provided, they can do their own market research and can use their own experience
Why did you advise your client to issue a Calderbank offer and what were the potential risks if they had proceeded to arbitration instead?
I advised my client to issue a Calderbank offer as it provided a cost-effective way to reach a resolution, whilst demonstrating a genuine attempt to settle. Arbitration can be costly and time consuming, with fees for the arbitrator and legal representation. Additionally, arbitration introduces uncertainty, as the outcome is outside the control of both parties. A Calderbank offer also provides cost protection in the event of arbitration, as an unreasonable rejection could result in the other party being liable for costs.
What key terms did you include in the Calderbank offer to ensure it was a genuine attempt to settle?
This offer includes:
The PROPOSED RENT and justification
A TIMEFRAME for acceptance
A statement that the offer was made ‘WITHOUT PREDJUDICE, SAVE AS TO COSTS’
A clear explanation that acceptable would make the agreement LEGALLY BINDING.
How did you handle the tenant’s lower rent expectation during negotiations, and what strategies did you use to achieve a settlement?
I engaged in open communication, ensuring the tenant understood the basis of my valuation. I presented robust comparable evidence and addressed any concerns about affordability or market conditions. To avoid a stalemate, I proposed structured negotiations, including phased rent increases or other compromises. The Calderbank offer was used as a final attempt to settle, making it clear that arbitration would be a last resort.
Why is it important to have a rent review memorandum, and what are the consequences of failing to document an agreed rent review?
A RR memorandum formally documents an agreed rent, ensuring clarity for both parties. If not documented disputes may arise over the reviewed rent, potentially leading to LEGAL CHALLENGES. The lack of a signed memorandum could also affect enforceability, making it harder for the landlord to collect rent at the revised level.
In what circumstance might a LL refuse to make a Calderbank offer?
If they are confident of achieving a higher rent through arbitration.
They believe the tenant is financially week and may struggle with an increased rent.
The rental uplift in minor, and the cost of arbitration is justifiable.
How would you have approached this case differently if the lease had specified Independent Expert Determination instead of Arbitration?
If Independent Expert Determination was specified, I would have ensured that my market evidence and valuation rationale were presented in a way that aligned with industry norms, as the expert can make a determination without relying solely on the parties’ submissions. The focus would be on providing clear, robust comparables rather than legal arguments.
How does the use of Comparable Evidence influence negotiations in a rent review, and how did you verify your comparables in this case?
Comparable evidence is crucial in establishing Market rent and influencing negotiations. I ensured the compass were:
Recent (ideally within 6-12 months)
Comparable in size, location, and lease terms.
Verified through discussions with agents, databases, and lease documentation.
Adjusted to reflect differences in lease incentives and property condition.
What is the definition of Market Rent?
Market Rent (MR) is defined in the valuation global standards as:
‘The estimated amount for which an interest in real property should be leased on the VALUATION DATE between a WILLING LESSOR AND WILLING LESSEE on appropriate lease terms in an ARM’S LENGTH TRANSACTION, after PROPER MARKETING and where the parties had each acted KNOWLEDGABLY, prudently and without compulsion (see IVS 104 paragraph 40.1)’
How have recent market trends in industrial rents influenced rent review disputes?
Industrial rents have increased significantly in recent years. Some tenants are challenging uplifts due to economic uncertainty.
How does the Arbitration Act 1996 govern the arbitration process in rent reviews?
The Arbitration Act 1996 provides:
A framework ensuring a fair, impartial process
Limited grounds for appeal, mostly for serious irregularities
Arbitrators the power to award costs
Who appoints the arbitrator?
The President of the RICS.
Why is an arbitrator appointed by the President of the RICS rather than the parties?
Because the tenant would choose a tenant friendly arbitrator and the landlord would choose an landlord friendly arbitrator, and avoids conflict of interst
