An initial comprehensive analysis of the lease is imperative, particularly focusing on the rent review clause. If there is a rent review clause this should state the frequency of the review and the specific timelines to serve notice. Typically, this will be every three to five years from the date the lease was signed. Failure to serve a rent review notice within the designated timeframe can prevent the rent review from taking place and result in no rental increase.
Typically, rent reviews are scheduled as stipulated in the lease. Landlords have the prerogative to initiate this review, to ensure the rent aligns with the market. Undertaking a rent review not only has the potential to increase rental income but can also enhance the property’s value.
Rent reviews generally fall into two categories: Retail Price Index (RPI) and Market Rent. If the lease specifies an RPI-based review, the valuation is usually formulaic, as defined in the clause. Conversely, if it is based on open market rent, a negotiated agreement between landlord and tenant representatives is essential to determine the appropriate rental value.
When reviewing open market rent, it is essential to scrutinise the rent review clause to understand how the property is to be valued at review. An in-depth market analysis of comparable properties in the vicinity will offer insights into whether the current rent aligns with the market, considering factors like age, dimensions, and quality, may be necessary.
It’s noteworthy that some rent review clauses are “upwards only,” which is favourable for landlords since it eliminates the risk of reduced rent. Conversely, leases with both upward and downward review clauses necessitate a meticulous assessment of the estimated rental value.
Many GP practice leases involve GP tenants who receive rent reimbursements from the NHS. Therefore, it’s pivotal to collaborate with the tenant to guarantee that any rent reimbursement remains aligned with the NHS rental reimbursement. Typically, this involves forwarding the rent review notice or memorandum to the relevant NHS body, they will then engage a District Valuer or an equivalent representative for a rent assessment.
While most reviews are negotiated amicably in the first instance, the lease should ideally contain a dispute resolution mechanism.
Given the intricate nuances of the rent review process and the importance of comparable rental evidence in the healthcare sector, enlisting a specialist healthcare surveyor is essential. Their expertise ensures a thorough review process, culminating in an equitable and optimal outcome.
If you require assistance with your GP landlord rent review please contact our team.
