How comparable evidence supports rental negotiations
In the vast majority of rental negotiations we handle, whether rent reviews, lease renewals or lease restructuring, the primary route to reaching an agreement is the analysis of comparable rental evidence.
In this article, Amy David, Head of Lease Advisory, explains some of the key factors that should be considered during each negotiation.
What makes a strong comparable property?
The ideal comparable property should be as similar to the subject property as possible. Open market lettings generally provide the strongest form of evidence. Other lease negotiations and rent determinations may also be relevant, but they are usually considered secondary to recent new lettings.
On some industrial estates or business parks, neighbouring properties may have recently been let on similar lease terms and be comparable in size, specification and condition. This evidence can potentially be applied as a direct comparison, making the negotiation relatively straightforward.
Why direct comparisons still need careful analysis
Even where several nearby lettings are available, a surveyor must consider the specific assumptions and provisions of the lease.
For example, a rent review may require consideration of the hypothetical lease term and the assumed condition of the property. These factors can affect how much weight should be given to each transaction and whether adjustments are needed before the evidence can be applied.
Assessing unusual properties or limited evidence
A more detailed analysis may be required when a property is unusual, situated in an area with limited transactional evidence, or significantly larger or smaller than surrounding buildings.
This can involve widening the geographical search area, reviewing evidence from comparable towns and making reasoned adjustments for the similarities and differences between properties.
An experienced surveyor with detailed knowledge of the local market is well placed to select appropriate evidence, identify its limitations and justify any adjustments during negotiations with the opposing surveyor.
Comparable evidence at third-party determination
Comparable evidence becomes especially important when a rent review or lease renewal proceeds to third-party determination because negotiations have not resulted in an agreement.
The evidence may need to be agreed between the parties, although each surveyor’s analysis and interpretation of the figures may differ. Collating strong evidence and analysing it properly from the beginning of an instruction can support a smoother review or renewal process and strengthen a party’s position if formal determination becomes necessary.
The value of early professional advice
Comparable rental evidence should not be applied mechanically. Every transaction needs to be considered in the context of the property, lease terms, location and wider market.
Obtaining professional advice at an early stage can help landlords and tenants understand the available evidence, identify appropriate adjustments and approach negotiations from a well-informed position.
How we can help
For professional support with a rent review, lease renewal or lease restructuring, visit our Lease Advisory page: Expert Lease Advisory services for Landlords and Tenants – Vickery Holman.
