Lease Contracts and Rent Reviews
Welcome to our November article this month we are taking a look at lease contracts and rent reviews.
The majority of pubs, restaurants, cafes and nightclubs are owned and operated on a leasehold basis. That is a company or private individual owns the property (freehold) and lets the property to an operator to run with a contract (leasehold). If you own or operate a business and pay rent to a landlord then you are a leaseholder. You therefore have to comply with the terms of your lease.
Framing the relationship between the Landlord and Tenant is the lease. The lease is set in the larger framework of legislation, the most important of which being the Landlord and Tenant Act 1954. If you are the tenant of a large pub company, then the most recent important legislation is the Pubs Code.
Everything that you can or can’t do and everything that is needed to move on a dispute over repairs, rent, occupation or use of the premises is contained somewhere in the leasehold contract. It just needs a trained eye to find it. In most circumstances a surveyor will be able to advise, in more complex cases such as the exact interpretation of clauses you may need a solicitors input. In even more complex cases an opinion from a Queens Counsellor (QC) may be needed.
Lease renewals and rent reviews
Perhaps the most common issue is at the time of rent review or lease renewal. At both points in time the Landlord is likely to try and agree a rent increase. So here are some tips to avoid paying more than you have to:
- Any increase in rent has to be by agreement, a new rent cannot just be imposed.
- Most landlords will not have carried out a market valuation, they just want more rent
- Get some advice from a surveyor
Most Landlords or their advisors change their attitude when they know you are getting professional advice. Sometimes it is all that is needed for them to take a more reasonable approach.
If a rent can’t be agreed, then there will be a process to follow within the lease. This can be quite expensive but could be the right thing to do dependent on the advice provided.
In one of our cases where we acted for the tenant. The Landlord was asking for a rent increase from £25,000 to £32,500 per annum. We were instructed by the tenant to act on their behalf. After three meetings with the Landlord and then their advisor we agreed a new rent at £18,000 per annum.
Lease renewals are different but again there is a clear route through any dispute, the framework for this is the Landlord and Tenant Act 1954. Where, in very general terms and if protected under the lease (this is in the lease) in most cases you are entitled to a new lease under similar terms to the old lease but at a market rent.
How we can help you
We have been reading and drafting clauses in leases for over 30 years particularly in the Licensed Leisure sector and can pick things up quickly. Things like responsibility for repairs, decoration and insurance will all be detailed in the lease. If we can take some pressure off by reviewing your lease contract please let us know.
We love acting for tenants in opposing rent increases where the Landlord is asking for rent at above market levels. Please do get in touch if you have a rent review due.
Do you want to learn more about leasehold contracts and rent reviews? Please join us at our free workshop on Wednesday the 24th of January 2024 11am to 12pm. Please sign up using this link Lease and rent review workshop
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