You Don’t Always Have to Cave in to Rent Hikes
By Peter Scott | Property Leasing | Monday 30th June 2008You’ll have to excuse me if I sound a bit hot about this issue, but I am sick and tired of the prevailing attitude in the property leasing industry that significant rent hikes during rent reviews are something we all have to just live with.
That is simply not the case. Despite the fact that leases give landlords a clear opportunity to put the rent up at scheduled times of review, the percentage and the conditions surrounding any increase are definitely not set in concrete.
I am currently finalising negotiations on behalf of a client in the industrial sector, a producer of goods that are in households throughout the country.
At their recent rent review, their landlord told them the rent would be going up by 30 percent. This client currently pays around half a million dollars in rental each year, so this rise was going to cost our client several hundred thousand dollars over the following three years.
I considered this outrageous and got to work to look at the contract and check into whether the landlord was fulfilling all his obligations. On closer examination, it turned out he wasn’t.
Without getting too much into the commercial sensitivities of this individual case, my client was being charged rental on land he was not occupying or using, and there were several other discrepancies regarding the assumptions behind the valuation and other matters relating to their occupation.
We’re now on target to reduce this particular client’s rent rise by something over $100k.
Right now, for the majority of commercial tenants, any action that is going to add value to their business and reduce costs is critical.
We don’t have to take all rent rises at face value. I’ve seen many successful and tough businessmen roll over at rent review time, simply because they didn’t believe they have the power, the right, or the leverage to negotiate a better deal.
That’s nonsense. If you believe your rent is about to go up unreasonably, give me a call and we’ll look into it.
Tuesday 1st July 2008 at 12:05 pm
Peter I agree completely – in our own case we were stunned to receive a large rent increase and a close examination revealed that the method of determining the rental value was flawed. Not only did we manage to get the landlord’s valuer to reassess the rental, we also invested a modest amount in a second valuation which showed an even lower figure. The landlord agreed to split the difference and we saved a substantial amount of money. I admit I was at first apprehensive about challenging the rent review and would have valued the advice of an expert in these matters.