16% Increase in my commercial rent – fair?

by Readers Question

14:10 PM, 20th June 2016
About 2 years ago

16% Increase in my commercial rent – fair?

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16% Increase in my commercial rent – fair?

I currently rent a commercial property and I have just been hit with 16% rise in rent, this seems to be a bit excessive. To be fair I haven’t had a rise for 4 years, but even so it seems like a very large hike.commercial

Can anyone with commercial property experience tell me if this sounds reasonable?

Many thanks

David



Comments

Neil Patterson

14:12 PM, 20th June 2016
About 2 years ago

Hi David,

I am sure it would help readers to answer your question if you could tell us what type of commercial property it is and where it is please?

Tony Lilleystone

15:09 PM, 20th June 2016
About 2 years ago

What does your lease say about rent increases?

Graham Bowcock

15:12 PM, 20th June 2016
About 2 years ago

Dear David

Your starting point should be to refer to your lease; this should set out the frequency and basis of reviews. For example it might be in line with RPI or simply Market Rent. By and large the percentage increase is not relevant (unless that is agreed in the lease). You could be going from £100 to £116 and still be getting value for money. The key thing is the actual rent you are paying and whether this is appropriate; you may have been on a soft deal to encourage you to go into the property in the first place (perhaps giving you time to fit out or get established).

If your lease allows for a review, find out the basis and then see if this gives you a realistic rent for similar properties in your area. If you need advice then get a local chartered surveyor to advise you.

Regards

Graham

Neal Craven

15:32 PM, 20th June 2016
About 2 years ago

Very much depends on what and where.

In our location some retail rents will have increased by at least that others have fallen significantly office rents are reasonably stable but industrials have risen.

Initially I would ask you landlord how he got those figures and if you aren’t satisfied take advice from an experiences surveyor, let me know if I can help.

Gennie Nash

16:04 PM, 20th June 2016
About 2 years ago

Have you taken your rental figure from day 1 and added, say, what you would expect your rent to increase by each year, then see what it might be by now if you had an increase each year? (also, how much you have saved by not having the yearly increases). This is a good indication of what you could be paying if you had a normal increase each year added.
We have been renting properties for 40+ years and have always increased on a yearly basis by the RPI. This has always worked out very well for both tenant and LL.
I have on a couple of occasions been called by a company that basically rings the surrounding landlords to ask how much rent they charge because a local tenant (like yourself) has been hit with an increase after several years and cannot believe the increase. Personally I think its a false economy to not increase each year for both parties.
Perhaps you could suggest this for the future?

Onslow Clough

19:43 PM, 20th June 2016
About 2 years ago

Thanks for all the feedback, just to fill in a few more details. It is a commercial premises, classed as a light industrial unit in Huddersfield. The rent has jumped from £686 to £800 pm. What makes things more complicated is that initially i had a 5 year lease that had a provision for the rent to increase 2% each year, after the 5 years the lease reverted to what i presumed was a rolling contract. However, the 2% increase stopped.

That was 4 years ago, now the landlord is saying that I don't have a valid lease and that the rent is now £800 take it or leave it. The original lease would have gone up 8% over the 4 years (2% pa) but i am being hit with a 16% hike. I have to be honest and say that it isn't much more than the average for the area but the proportion rise seems unfairly large.

Nick Pope

12:31 PM, 25th June 2016
About 2 years ago

At the end of your fixed term we still fairly deep in recession and I suspect that the landlord decided it was best to keep the unit occupied rather than trying to re-let and being hit with business rate if it was empty. The proportional increase may seem high but rents have risen at a higher rate than 2%p.a.

As the fixed term has ended he is at liberty to give you notice and find another tenant so you have a choice - stay and pay or go. The latter decision means that you have the costs involved in moving.

If you are happy that your business is strong then I suggest you ask for a new lease of a length to suit you and try to negotiate fixed increases, perhaps in line with inflation and with options to continue after the fixed term..


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