Challenging Rent Reviews
What happens when negotiations reach an impasse during a rent review?
The team at O’Neill & Co. are highly experienced property negotiators, regularly working on behalf of our clients to reach successful agreements on rent reviews or more complex lease restructuring.
Whilst most rent reviews are settled outside of the arbitration process, there are times when our surveyors are required to present a client’s case to an arbitrator.
The Challenge
A prominent national company was leasing our client’s valuable central commercial property, and as per the lease, a rent review was due. Market trends suggesting an increase in the market rent and following several rounds of negotiations to settle the rent review settlement could not be reached.
A commercial lease will contain a mechanism in the rent review clause for when such an impasse is reached in the rent review negotiation process. The case can be referred to a third-party arbitrator, who is normally appointed by the President of the day of the Society of Chartered Surveyors SCSI or the Law Society. This arbitrator hears evidence from both parties’ perspectives and makes a binding decision.
The timing of this particular case made for a formidable challenge for O’Neill & Co. given the date of the rent review being during the COVID lockdowns, business closures and general uncertainty in the marketplace.
O’Neill & Co.’s Strategy
Thorough Market Analysis: The first step in any rent review negotiation is a comprehensive analysis of the current real estate market (lease comparables). O’Neill & Co. delved deep into data, looking at comparable properties, rental trends, and economic indicators that justified the rent increase, presenting it to the client in the first instance to the rent review surveyor acting for the tenant and subsequently to the appointed arbitrator later.
Leveraging Expertise: O’Neill & Co. used their extensive knowledge of property valuation and market dynamics to present a compelling case. Our team highlighted the appreciation of the property’s value and demonstrated how the rental rates were lagging behind market standards, particularly due to the property’s busy town centre location.
Open and Transparent Communication: Effective communication is the cornerstone of successful negotiations. Our team maintained open, transparent, and respectful dialogue, ensuring that all parties felt heard and valued throughout the process.
The Successful Result
After presenting a meticulously crafted case, O’Neill & Co. successfully convinced the arbitrator that the rent review proposal was a fair and reasonable one for the property in question. This achievement was not only a financial win for the property owner but also a testament to the value and power of expertise, strategy, and effective communication.
Conclusion
This case serves as a reminder of the vital role that professionals in the real estate industry play. Rent review negotiations can be daunting, especially when facing a large national company, but with the right strategy, knowledge, and communication skills, success is attainable. In such cases it is always advisable to engage the services of a skilled chartered surveyor who can navigate the complexities of real estate, ensuring that their clients’ interests are protected and their investments optimised.
For Rent Review enquiries please contact:
Stephen Keeler
or
Darac O’Neill