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Published byMarley Vallie Modified over 10 years ago
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Jennifer Slade
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Rent Rent review
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Amount Payment dates Rent suspension/abatement Payments defined as “Rent” Interest
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Purpose Periodic reassessment of rent Valuation exercise – determined by provisions ▪ Open Market Rental Value (OMRV) ▪ RPI ▪ Turnover rent Upwards only rent review?
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Rising market Falling market
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Rising market Falling market Reviewed rent (upwards only)
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Rent review provisions = directions to valuer Use of “comparables” “Hypothetical lease” is subject of valuation Based on actual lease Assumptions and Disregards introduced to ▪ Eliminate contingencies of actual letting ▪ Create “level playing field” ▪ Produce fair valuation?
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Hypothetical letting: lease provisions
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Take actual clause Widen (i.e. less restrictive)
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Hypothetical letting: lease provisions Take actual clause Widen (i.e. less restrictive) Lease more attractive to hypothetical bidders More/higher hypothetical rental bids
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Hypothetical letting: lease provisions Take actual clause Widen (i.e. less restrictive) Lease more attractive to hypothetical bidders More/higher hypothetical rental bids Rent inflated at review (landlords’ objective)
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Hypothetical letting: circumstances
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Take actual circumstances of letting/market Increase competition for hypothetical letting/adjust circumstances
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Hypothetical letting: circumstances Take actual circumstances of letting/market Increase competition for hypothetical letting/adjust circumstances More/higher hypothetical rental bids Rent inflated at review (landlords’ objective)
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(a) no works … that have diminished the rental value (b) if destroyed… Premises rebuilt (c) L and T covenants have been performed Is this fair to T?
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(d) willing landlord and willing tenant… with vacant possession Is VP always realistic? (e) fully fitted out
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(f) Hypothetical Lease contains same terms as [actual] Lease save for Initial Rent… and… any rent-free period [for fitting out] Rent-free’s and other inducements: Broadgate Square v Lehman Brothers “headline rent” vs “effective rent”
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Take a five year lease – “rent” is £100K p.a. 12 3 45
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12 3 45 Rent-free of 12 months
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Take a five year lease – “rent” is £100K p.a. 12 3 45 Rent-free of 12 months £0 £100K
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Take a five year lease – “rent” is £100K p.a. 12 3 45 Rent-free of 12 months £0 £100K Headline rent = £100K p.a. BUT Effective rent = 400/5 = £80K p.a.
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(f) (continued)… including provisions for rent review (g) term of hypothetical lease (h) (i) 1954 Act renewal / VAT recovery
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See s34 LTA 1954 (a) occupation (b) goodwill (c) improvements
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Experts vs arbitrators Formalistic reviews Time of the essence
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