Deeper Into the Rent Review Process…with a few chartered surveyors as guides…

The chartered surveyor we wanted to hire to represent us is from a town, Camborne, about 15 miles from Penzance. He is very familiar with Penzance and a very fair-minded man from our assessment. Early on he realized, and we realized, he had a conflict of interest.  He was representing a landlord two shops up from us…meaning:  he was trying to negotiate as high a rent increase as possible for the landlord therefore it would be hard for him to, at the same time, negotiate a low a rent increase as possible.

From what I was learning the problem was in the system, the lease code itself, NOT in the chartered surveyors themselves, although the professional trade organization that is the Royal Institute of Chartered Surveyors (RICS), perpetrates the systemic unfairness in the lease code and has made no attempt to make the lease code fair regarding including a “downward” rent option in a rent review.

An UORR (Upward Only Rent Review) is the current standard in the UK.   What this means is that rents can NEVER go down. At the point of a review they can either stay the same or go up.   In this way the property value is enhanced for the landlord at all times and in all markets.

The more I spoke with other tenants in Penzance the more concerned I got and the more futile I felt.  No matter what I found out these surveyors would work it out amongst themselves and a big rent increase was likely…the most I could do was gather facts and get a bit hysterical about it all. 

In May 2008 the BBC did a series on landlording in feudal Britain and Michael and me watched the series. Simon Wood was the historian hosting the program. As he spoke about the landlord/tenant relationship in the 1300’s, before and after the Black Plague, I started to feel very uncomfortable.  Little has changed in 700 years!

Concurrent with running the Deli,  I was applying to Falmouth University’s Professional Writing MA Program. As part of the application process we had to submit a portfolio of past writings and also a paper on an “injustice”…I had no problem in knowing what I would write about.

The title of my paper was “Feudal Britain is Alive and Well on the High Street”.

The paper is coming next…

Published in: on April 20, 2009 at 8:04 pm  Leave a Comment  
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Things got ugly the further along the review process unfolded…

As the chartered surveyor we hired made repeated attempts to contact the landlord’s agent weeks and months went by.  Meanwhile, the news regarding the economy got worse.  Here in west Cornwall we are largely still a rural economy with tourism being a main source of income.  Summers and holidays make the population double as second home owners and holiday-makers make their way to the outstanding natural beauty that is this part of England. 

I thought that the current economic news would impact the rent review amount.  I found out I was wrong.  The rent review would be determined from the rents agreed or paid in the six months previous to the date of the review.  So any commercial tenants who had agreed high rents in 2007 and 2006 would be causing an increased rent for us in  2008.

The more my husband and I thought about it the crazier we felt.  Could this be true?  Could the landlords get away with raising rents in a falling market? 

When you are on the High Street as a trader you have to respond to the changing market daily with fresh new products and signage and increased customer service.  As a shopkeeper we felt the pulse of Penzance in our every day life.  When we had a good day so did the lingerie shop down the street and the coffee shop around the corner.  When people came into town we all benefitted equally.  

I just assumed that the landlords in Penzance were a part of the loop and in the marketplace like the rest of us until the rent review.

It was then I began to get hurt and angry.  How could this be?  How come no one had noticed the inequities before in the commercial lease process?  How come no one had tried to change the lease code?

And so, I began asking LOTS of questions….and I found out more than I wanted to know.

I think human nature is wonderful — so many of us want to see the best in life and so we do.  But it does not serve us or anyone else to pretend the ugly parts of life do not exist.  It is up to us – one by one – to notice and do our bit for the good of us and for the community.

In my next post I will share what I found and how I started to see the picture…

Published in: on April 16, 2009 at 9:43 pm  Leave a Comment  

This all started about a year ago…

We were involved in our first rent review .  We got a demand letter from our landlord for an increase in rent, from $14,250 a year to £18,000.  a year.  We were on a three year cycle of rent review,  now typical for many commercial tenants in the UK.    A five year cycle was the most common until recently.   I thought it would be a fairly easy process of coming up with a balanced rent determination….open and clear and easy to understand. 

We soon found out that this was not the case.  Commercial rent determination is a complicated and hidden process in the UK.   Our solicitor told us that we would be wise to hire a chartered surveyor to represent us.   Surveyors link amongst each other to find out the rents in the area and then the landlord’s surveyor communicates with the tenants surveyor (us) and an agreed negotiated amount is determined.

Chartered surveyors are paid on a percentage of the agreed revised rent.  We knew a very kind surveyor from out of the area who offerred to do the negotiation if I made the case for what we wanted — either no increase in rent or a small increase in rent.   He told us he would only charge us on his hourly rate.

I set out to do what I thought would be a relatively simple process.

I soon found out that was not the case.

Chartered surveyors, all members of the Royal Institution of Chartered Surveyors, RICS,  speak their own language.  Commercial properties are divided in terms of A1, A” and A3 zones — I still do not know what they are.  They have to do with the rentable value as a percentage of the prime retail space. 

Assessing these zones and agreeing same are the first jobs that the chartered surveyors need to do.  After they decide they do not have a conflict of  interest in the area in representation.  For example, a surveyor representing the landlord of a neighboring property should not accept work on behalf of a tenant next door as he/she has a conflict of interest.

Published in: on April 8, 2009 at 1:41 pm  Leave a Comment