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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 9339
Experience:  I have been practising for 30 years.
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We lease a light industrial building of approx 11000 sq ft

Resolved Question:

We lease a light industrial building of approx 11000 sq ft (warehouse space plus 1600sq ft of office space). We have converted its use to D1 and run a charitable school within it.
Our landlord is trying to put the rent up by just under 25%.
The rent review was due in Feb 2015. Our contract says the landlord must approach us 3 months beforehand to agree a new open market value; if we cant agree, we can jointly appoint a surveyor.
A surveyor first approached us in Oct 15 regarding rent review and subsequently recommended an open market lease value of £103,250. We asked for this to be delayed until September to allow us to adjust our income (our financial year runs Aug - July and we are fees-based so an in-year increase will leave us with a shortfall). The landlord has agreed to defer the increased payment until Sept, but then wants the shortfall from March - Sept to be made up over the next 3 payments.
The landlord is Workspace and they have other units nearby, which are serviced offices and B1 space. The price / sqft for a serviced office is between £1.75 and £2.37. Ours is £10.00 / sq ft. Nearby light industrial units are up around £7 - £10 / sqft but these are all new-build with additional features. Our building is old and has asbestos in it!
Do I have reasonable grounds to appeal the amount of increase; or to say we will accept the increase applied from September 16?
Submitted: 1 year ago.
Category: Law
Expert:  F E Smith replied 1 year ago.

There are 2 issues here.

The applicable date of the increase and the amount of the increase.

With regard to the applicable date, the applicable date starts from when the old rent finishes which is generally the review date.

If the rent takes 12 months to review, then the increased rent will be due not only from that day forward but also in respect of the previous 12 months. It does apply in retrospect.

The asbestos is not normally an issue provided it is not disturbed. If it’s something which you are responsible for removing under the terms of the lease, it may affect the rent. What should not affect the rent already improvements you have made. They are disregarded.

I don’t know where the surveyor came from and whether he was mutually agreed between you but it would be worthwhile getting another surveyor to give an open market rent in view of what you have said about the adjacent units.

Meanwhile, you need to keep paying the rent and I would suggest that you paid it at the increased rent while you argue so that the landlord cannot allege that you are in arrears and try to foreclose on the lease. He does not need a court order to do that if it’s a properly drafted lease, he can simply lock you out when the rent is 14 days in arrears.

Here is a most informative article on rent reviews in commercial property which will really help you.

http://www.falmouthchamber.co.uk/financial/rent-reviews-in-commercial-property.html

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