Property Occupier FAQs
Rent Reviews
Rent reviews typically occur every five years depending on the length of the lease. Don’t leave it to the last minute to consider your rent review strategy. There may be time limits stipulated in the lease’s rent review clause within which the landlord or tenant might have to issue or respond to a rent review notice. Eighteen months before the rent review date should give sufficient time to start checking the lease to ensure it doesn’t specify a time limit and to appoint a rent review surveyor. Missing deadlines can be costly: tenants could have to pay an inflated rent.
Yes. The tenant must pay rent at the old rate whilst the rent review is being negotiated. Once an agreement is reached the difference (back rent) will have to be paid. If the rent increases, interest often has to be paid on the overdue amount.
Open Market Rent is the best rent a property might achieve if let on the open market, given a willing landlord and tenant and taking into account the terms of the lease and the state of the local commercial property market.
Rent reviews can be technical and complex. Appointing a surveyor is the most effective way of accessing the open market, taking into account local comparables and negotiating allowances on specific points and assumptions. Surveyor’s fees are inexpensive in comparison to overpaying rent or for letting the case reach arbitration.
Business Rates
Business rates are a commercial property tax, payable by property owners and occupiers. The amount payable will depend on the “rateable value” of the property, which is broadly based on the hypothetical annual market rent value. It is payable whether the property is occupied, empty, or undergoing redevelopment.
In principle, Business Rates are a contribution from businesses towards services provided by the local council such as local transport and improving public spaces, indirectly benefitting businesses in the area.
The occupier of the non-domestic* property is liable for rates. If the property is empty, then the liability can lie with the owner.
*Any property not used for residential purposes such as Offices, Shops, Warehouses, Factories, Pubs.
Your local council will send you a Business Rates bill annually for the following tax year. This will usually arrive in February or March.
Your bill will explain how much you must pay.
Business rates liability are worked out based on your property’s ‘rateable value’ multiplied by the Uniform Business Rate.
What is rateable value?
The rateable value is an assessment of the annual rent the property would rent for if it were available to let on the open market at a fixed valuation date, the Antecedent Valuation Date (AVD).
The 2017 Rating List runs from 1st April 2017 to 31st March 2023 and used an AVD of 1st April 2015.
The 2023 Rating List runs from 1st April 2023 to 31st March 2026 and based on an AVD of 1st April 2021.
What is the Uniform Business Rate (UBR)?
The UBR is set every year by the government and is adjusted every year for inflation by applying the Retail Price Index.The UBR for 2022/2023 is 51.2p. Your multiplier may be different depending on your rateable value and which billing authority you belong to.
Lease Renewal
18 months before the expiry date would not be too early. A tenant will need to consider whether the premises remains suitable for their business and if relocation is contemplated then considerable forward planning is required before the expiry date. Allsop’s Leasing teams can assist here. Dilapidations implications may well arise in these circumstances and we are experienced in advising on both the valuation and legal aspects of such claims.
A Section 25 Notice must be in a prescribed form. It is vital that the content of this notice is carefully checked straight away, do not ignore the notice.
The Section 25 Notice will also tell you if your landlord intends to oppose a tenancy renewal; there are specific grounds where this is permitted such as for redevelopment purposes or for his own use. You may need to plan an unexpected move. We can refer you to our Office Leasing Team to help you with this.
If the landlord wishes to keep his tenant after the lease expiry but on new lease terms, again a Section 25 Notice will need to set out proposed terms. We can advise you on these terms.
Where the tenant has the protection of the Landlord & Tenant Act 1954 then strict procedures must be adhered to. Strategic timing of the notices and counter notices will improve the party’s position and as market conditions are a deciding factor in determining the strategy, a lease consultant is the most effective person in the process to achieve this aim.
Dilapidations
Yes – dilapidations are repair works to the property which have not been undertaken by a tenant in contravention to the repairing clause in the lease. These can be limited by section 18 of the Landlord & Tenant Act 1927.
Reinstatement are works involving the removal and making good of alterations carried out on the premises by the tenant under either the “alterations” clause in the lease or “Licence to Alter” deed. These are not limited by section 18 of the Landlord & Tenant Act 1927 and it is important to properly understand the provisions of the lease to determine whether the landlord is required to follow specific procedures to validate a claim or to serve notices etc on time prior to the end of the lease.
It is important to be prepared. Seek advice six to nine months before the end of the lease
As tenant, for tax and balance sheet purposes it may be necessary to seek an estimate of potential dilapidations liability three to four years before the end of the lease. We are happy to provide this estimate at no cost.
Otherwise, it may be cheaper to plan to undertake the dilapidation works than pay a settlement figure to the landlord. So make sure you have planned sufficient time to do this.
No. The dilapidations liability can be limited by section 18 of the Landlord & Tenant Act 1927 to the lower of :
the cost of undertaking the dilapidation repair works and
the diminution of the landlord’s reversion due to the dilapidation works having not been undertaken.
The section 18 valuation can give valuable protection to the tenant. This is why it is important to have a dilapidations negotiator that has both valuation and property market expertise.
In some instances there may be express provisions (agreed at the outset) which allow the tenant to vacate free of any dilapidations cost
Guidance to parties that the courts strongly encourage parties to follow during a dilapidations dispute to limit the costs and time incurred.