Unusual rent review

11 May 2025

(2025 May: LinkedIn) In 1989, my client bought a property in South London prior to auction, let to a national retailer. The retailer closed the branch and offered a new intermediate lease for circa £1M which was bought by an investment company. That company sub-let the property to another national retailer. The rent reviews are every 21 years and geared to the market rent (as defined by the lease), the first review in 1995. Although my client owned the freehold, part of the property was on a long lease with a same date review. The freeholder’s surveyor reasoned that the rent should include the notional rent of an overhanging building (nothing to do with my client). We investigated the history of the building and obtained legal advice. Rather than incur the costs of going to court in the hope of rectification, we reckoned the least expensive route was to agree a slightly higher rent than the stipulated gearing percentage.

Before the 2016 review, the intermediate lease had been assigned to a well-known property company. For the 2016 review, triggered in 2018, the freeholder via a different surveyor reiterated the same reasoning. This time I referred the review to arbitration, to get the arbitrator to go to court for a declaration. But before that, my client sold the freehold (and long lease) to the well-known property company on condition that part of the purchase price would be withheld pending the outcome of the review. To the buyer’s surveyor, I provided the background information, etc. After a while, the buyer decided to settle also by agreeing a slightly higher rent. The claw-back on the purchase price is about half of what it would’ve been if the review had been nil increase.

I am unable to disclose any more because the sale is subject to an NDA.

[To put another way:

In 1989, my client (A) bought the freehold – including part on a long lease from B – all let on long lease to C.

Next, C granted a new intermediate lease (premium circa £1M) to D.

D sub-under lease to E.

Review 1995, (i) between A and D; then (ii) between B and A, B’s surveyor reasoned as above.

Before 2016, D assigned intermediate lease to F.

Before 2016 review was agreed, (triggered in 2018, B’s surveyor reasoned as above) A sold to F (subject to claw-back)

F agreed the 2016 review with B.]

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