How to Deal with Service Charges and Rent Reviews in Your Commercial Lease - By: Tim Bishop

Renting commercial property is a complicated issue, especially around the areas of rent reviews and services charges. Listed here are 7 common misunderstandings and problems, together with explanations about your rights as a tenant.

1. I cannot challenge the increase in rent that the landlord has imposed.

It all depends upon the terms of the lease. The landlord's ability to change or 'review' the rent is a very important part of the lease. It requires careful consideration when the lease is being drafted.

2. I am negotiating a new rent with my landlord. The rent is likely to increase as the landlord has insisted that the rent is assessed as if the lease were for 10 years even though the unexpired term is only 5 years.

Rent review is a very complex area and whether or not the landlord is permitted to do this will depend on the terms of the lease. The terms of the rent review clause need to be considered carefully both when you are negotiating the initial lease and when the rent is being reviewed.

3. According to the rent review clause in our lease, our landlord can serve a notice laying out a new rent. Unless I object to this rent within a specified period of time, the landlord is entitled to enforce this rent regardless of how high it is.

Yes, he might be able to! Rent review is a very complex area and whether or not the landlord is permitted to do this will depend on the terms of the lease. The terms of the rent review clause need to be considered carefully both when you are negotiating the initial lease and when the rent is being reviewed.

4. My landlord should have exercised his right to review the rent 18 months ago, but as rents were depressed then, he has waited until now when they have risen. He is now saying that he will put up the rent and backdate it by a year.

The terms of the lease will dictate whether or not the landlord is able to do this. Often leases will allow the landlord to increase the rent even after the specified day. The lease should provide that whenever the rent is reviewed it is always reviewed as at the stated rent review date. This is to avoid situations where landlords wait for the market to improve before starting the review. We can advise on all aspects of rent review and protect your interest when the lease is being negotiated.

5. I cannot challenge the alteration to the service charge contribution that the landlord has imposed.

The terms of the lease will dictate this.

6. I pay a service charge. I am unhappy as to the amount the landlord claims he is spending. However, I am obliged to contribute to this via the service charge.

Service charges are a very complex part of the lease and need careful consideration when the lease is being negotiated. However, a Code of Conduct for Service Charges does exist that might give you extra rights above those specified in the lease.

7. I pay a service charge and the landlord has provided certified accounts detailing expenditure over the last year. I have been told that this cannot be challenged.

Your lease should cover such issues. The Code of Conduct for Service Charges may also provide some protection.

Commercial leases can often be long and complicated. Agreeing to the wrong terms in the original lease, or failing to understand the meaning of your rights under that lease subsequently, can be very expensive. To make sure that you don't miss out, talk to an experienced commercial property solicitor about both the drafting of the original lease and any later interpretations. An experienced solicitor can in particular help to protect your interests in the negotiation of the original lease.

About the Author

Tim Bishop is Senior Partner at Bonallack & Bishop, a firm of Salisbury Conveyancing Solicitors highly experienced in advising on commercial leases. Tim is responsible for all major strategic decisions and has grown the firm by 1000% in the last 12 years. He sees himself as a businessman who owns a law firm.

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