LEGAL: RENT REVIEWS
Posted by
Annette Hanford
Dated: October 30, 2008 12:00 AM
THE LIE OF THE LAND
If you rent your salon it's likely your rent will be up for review at some point. But what options are open to tenants and what rights do you have? Philippa Aldrich reports
Your two biggest - and fixed - costs are staff and premises. To an extent, you can control staffing costs, but there may well be times when your landlord appears to act against you. Most commercial leases these days contain a mechanism for the rent to be reviewed at regular intervals, usually three or five years. But what should you do if hit with a request by a landlord for a significant rent increase?
WHAT TYPE OF RENT REVIEW HAVE I GOT?
First, tenants should have a look at the lease to identify the type of rent review being invoked. Some leases include clauses that provide for set increases in rent. The lease might, for example, provide that the annual rent will increase after three years. It is unlikely in this case that the tenant will be able to oppose an increase in year three as he has effectively agreed to it in advance.
Alternatively, the lease may contain an 'escalation' type of rent review where an index, such as the retail price index, is used as a basis for calculating the rent rise. Again, provided the right index has been used and the maths is correct, there will be little opportunity for the tenant to object.
Other rents are linked to turn-over, whereby the landlord will take a set percentage of the income. It is worth checking the landlord's calculations.
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