RICS DRS: Third party inexperience
22 February 2026Feb 2026. Rent review and third party reasons.
I act for a freeholder/ landlord whose tenant is a quoted property company. The tenant sub-lets the property to two different occupiers. The rent review in the head-lease between my client and prop co went to arbitration. In my submission to the arbitrator, I advocated that the hypothetical tenant could be an investor. In his reasoned award, the arbitrator rejected the possibility, preferring an occupier. As the actual tenant is an investor, the arbitrator’s reasoning did not make sense.
I act for the landlord of a double shop with two residential flats, the whole of which let to one tenant. The tenant occupies the double shop and sub-lets the flats. Before my client bought the freehold, the tenant had one shop and one flat, and had acquired the lease of the adjoining shop and its flat from the same landlord, and removed the dividing wall between the shops. On renewal of the previous two leases, a single lease. For the rent review, it is assumed that there are two shops. Under the lease, the tenant does not have the right to underlet just the ground floor either as a whole or in part. The review was referred to an Independent Expert. In my report, I acted as expert witness, I reasoned that the hypothetical tenant could be one tenant with two different businesses. In the reasoned determination, the IE opined highly unlikely that the hypothetical tenant would run a single business across two units or two different businesses each from one shop unit. Equally unlikely that the hypothetical tenant would want to occupy one or both flats for their own occupation or the occupation by an employee. IE, agreeing with the tenant’s surveyor, not recalling the last time they came across such a letting in the open market. The most likely scenario that a hypothetical tenant would acquire the property with the intention of removing the dividing wall to trade from one enlarged ground floor. So because under the Lease is the assumption the dividing wall remains, 7.5% allowance is appropriate.
For possibilities to be dismissed because the third party’s experience is limited is galling. I have experience of dual situations, including acting for one such tenant whose two shops on the same lease are used for different businesses, and when acting for a landlord on referral to a different IE where the single tenant also has two separate businesses. In another matter recently, approximately 10 miles from the double shop example, acting for a landlord on a review to an arbitrator, my evidence included a new open market letting to one tenant who divided the shop into two separate businesses.
The qualifications to be an arbitrator or independent expert imply wide-ranging experience. There is no excuse for a hypothesis to be ruled out just because of personal experience. Arbrix should in my view create a database of experiences so that even if a particular third party has no experience, it would be known another has, The particular third-party could then say something like ‘although I have no experience, I’m aware that others do.’
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