Editor: Rent reviews are difficult enough to value at the best of times, but there are two major problems in finding the correct market rental values as a result of Covid-19.
The first is obvious: to judge the market between March 2020 and June 2021. A period where, despite the fact that one assumes a hypothetical willing lessee, there was in many sectors virtually no market, and accordingly, consultants will be judging market rental values on a thin market, to say the least.
The second is less obvious – that some landlords have assisted tenants in every sector if they have been unable to use their premises by giving rent-free periods, deferred rent packages and the like.
The question is: how do we analyse the comparables we are using for the rent review on the premises we are dealing with, to verify whether the rent agreed on another rent review or lease renewal has enjoyed landlord’s assistance?
This is no different to analysing the comparable on an open-market letting where a landlord has given, say, a six-month rent-free period on a five-year lease, and the rental analysis of the comparable is worth 10% less than the headline rent.
It would be almost impossible to prove whether the rent-free period was given as part of the coronavirus negotiation, or at least in part as an inducement to the rent review settlement.
Every comparable will come with a different set of circumstances and will make the task of the rent review practitioners doubly difficult. It will be interesting to see how these negotiations pan out.
Anthony Lorenz, managing director, The Lorenz Consultancy
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