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Since March, landlords and tenants have (understandably) been focussing their attention on all things cash: rent payments, deferrals and suspensions.  The Coronavirus Act 2020 will, at least until 30th June, provide tenants with a shield against forfeiture & re-entry for the non-payment of rent, and further restrictions have either since followed or are pending against the use by landlords of statutory demands, winding-up petitions and the Commercial Rent Arrears Recovery procedure.  Otherwise, the natural operation of the provisions of most business leases will seemingly continue as before, regardless of the effect of the ongoing lockdown, including provisions dealing with rent reviews.

There will be issues to consider where a rent review date, or another part of the rent review process, occurs during the lockdown.

Where a rent review involves the time-critical service of notices and counter-notices, and notice is served on a tenant at its now closed premises, unless careful watch is maintained, the tenant could easily find itself out of time to respond to the notice, and may have no choice but to accept the landlord’s position on the review.

In the circumstances, and notwithstanding the recent property-focused easing of the lockdown regulations, it may prove challenging to instruct rent review surveyors who are willing and able to attend the premises in order to advise the parties, or to determine the reviewed rent where the parties are unable to reach agreement.  Provisions designed to deal with delays and interruptions to the rent review process could in practice become increasingly relevant.

Perhaps the most important likely effect of the lockdown relates to the valuation criteria.  Many leases require that a review, where independently determined, should be to the open market rent on a review date falling during the lockdown.  Unless the expert or arbitrator is clearly required to disregard the effect of the unprecedented lockdown and the surrounding circumstances on the valuation, a depressive effect on the revised rent cannot be discounted.  Indeed, in scenarios where a review is to proceed by reference to the landlord’s trigger notice, landlords may now prefer to delay triggering the review.

If the lease has a rent or a review based on turnover, the current market uncertainty could lead to landlords looking to renegotiate the terms in exchange for more tenant-friendly provisions.

Landlords and tenants alike should therefore consider carefully the requirements of any rent reviews during this uncertain period, and should also not overlook the fact that rent review dates are often linked to break clauses, which are increasingly relevant at this time.

If you would like more information, please contact our real estate solicitors by emailing or calling 01202 702645.