In the vast majority of rental negotiations we deal with, whether that be rent reviews, lease renewals or lease restructuring, the main route through which an agreement is reached is the analysis of comparable evidence. In this article, Amy Durkin, Head of Lease Advisory takes us through some key factors to be considered with each negotiation.
How do we use comparable rental evidence?
The ideal comparable property is as identical to the subject as possible. Open market lettings are the best form of transaction to use, other forms of lease negotiation or rent determination are relevant but should be considered secondary to recent new lettings. On some industrial estates or business parks, neighbouring properties may have recently let on the same lease terms and be very similar in size and quality. This evidence can be applied as a direct comparison, making negotiation relatively simple. However, in a rent review there will be further considerations such as the hypothetical lease term and the assumed condition of the property, so even a property with multiple nearby recent lettings will still require a surveyor to take these additional points into consideration.
When the property is unusual, in an area where there is less evidence or is for example much larger or smaller than all the other buildings in the area, a more in depth look at rental evidence is needed. This will include widening search parameters (such as distance from the property) and making adjustments to try and consider the similarities and differences between two properties. An experienced surveyor with a strong knowledge of the local market is ideally placed to select appropriate comparable evidence and justify any adjustment made to their opposing surveyor.
If rent reviews or lease renewals progress to 3rd party determination and negotiation has not brought about an agreement, the available comparable evidence becomes even more important. Therefore, collating strong evidence and analysing this appropriately from the start of an instruction is really beneficial to the smooth running of any review or renewal.
For any assistance with rent reviews or leases, please contact our Lease Advisory team.
