Business leases: renewing and ending
Business leases: paying rent and rent reviews
At the outset, the amount of rent a business tenant pays will be agreed with the landlord. Normally, this has to be paid in advance and is due on a quarterly basis. Rent will be payable regardless of how the tenant's business is performing. If the tenant fails to pay their rent, the landlord will normally take action to recoup the debt, either sending in bailiffs to seize goods to the value of the unpaid debt or repossessing the property and terminating the tenancy.
Many business leases make provision for rent reviews, often at three-yearly or five-yearly intervals. If a tenant cannot reach an agreement with the landlord, most commercial leases will include dispute resolution arrangements, usually involving the appointment of an arbitrator or independent expert who will settle the rental matter. Read an overview of rent reviews.
There are a number of different approaches to rent reviews. These include fixed rental increases which give the tenant certainty by stating how much the rent will increase by at each rent review period.
An alternative is to choose indexed rents. This means that the rent changes in line with a measurement outside the tenant's or the landlord's control, such as the Retail Price Index. Upward-only rent review clauses are common but tenants should be wary of these as the rent of the property will never fall, even when rents in the same area drop.
Agreeing break clauses with the landlord at certain intervals allows the tenant to assess whether they want to continue renting the business property, without having to wait until the tenancy agreement expires. See business tenant's rights to end a tenancy.