Restaurant rent reviews; how they work and how to negotiate the best deal

By BigHospitality Writer

- Last updated on GMT

Related tags: Renting

The biggest single charge that a restaurateur has to pay is usually the rent, and with most leases specifying five yearly rent reviews (although there are some that have them every three or four years), it's worth getting to grips with how they ...

The biggest single charge that a restaurateur has to pay is usually the rent, and with most leases specifying five yearly rent reviews (although there are some that have them every three or four years), it's worth getting to grips with how they work and how to negotiate the best deal.

When signing on a new or existing lease buyers should check when their next rent review is due so that they're prepared. Although some landlords are not always on the ball and can apply for the review months or in some cases years later, according to Head of Landlord and Tenant Department at property agents Davis Coffer Lyons Tim Munden. In which case many tenants may be perfectly happy to stay with the deal they've got until their landlord says otherwise.

However, if you're looking to sell and you know you've got a rent review coming up, Munden recommends asking the landlord to agree this before marketing the property, as it makes things easier and ensures the process isn't slowed down. The landlord is not obliged to do this, but things can be hurried along by having the case referred to an independent surveyor.

Presuming a landlord does contact you regarding a rent review, they will send notice to the tenant, sometimes this won't contain a suggested figure and a second letter will include this. In most cases tenants then contest this and start a negotiating process with the landlord, usually by letter. In this instance, check what other people in the neighbourhood are paying so you can go back with a realistic figure.

Check your lease to see whether you have to reply to the initial offer within a certain time period as some leases specify if you don't reply within 28 days you will be seen to have accepted the offer.

Munden has some advice on how to get the best rent review:

Do:

  • Check your lease carefully for any tenant requirements or time limits.
  • Do your market research so you can negotiate for a rent review based on the square footage of the restaurant, the location and what other restaurants in the area are renting for.
  • Treat it like any other negotiation – leave a bit of a margin for the landlord to come back and suggest a higher figure. They will almost certainly have done the same when suggesting their first figure.
  • Use the length of your lease to your advantage. If there's only five years left, most restaurateurs want 15 years, so you might get a rent reduction if you agree to take a lesser term.

Don't:

  • Tackle the review yourself if you're not familiar with leases – get the professionals involved, whether property agents or specialist lawyers. Someone who knows what will have an impact on the value of the property will be able to help set a realistic rate.
  • Try to negotiate on emotional terms – your landlord doesn't care if you can't afford the rent if it's a standard rent for the area and someone else will pay it. Facts are a better basis to barter from.

daviscofferlyons.co.uk

Related topics: Business

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