In the 1980’s, the large Central London landed estates became far more savvy in seeking inflation busting rent reviews by modernising the review formulae on residential leases. As much as the initial starting rent may have felt somewhat palatable with the reviews say every 21 or 25 years in the future, often a lessee would have thought ‘I won’t onw the lease when the next review comes up, so not really concerned.’
What no one foresaw was rapid house price inflation – All Prime London values have increased 500% since Dec 1995 – and the effect on the reviewed rent.
If the review was set to the higher of a percentage of the notional freehold value of the property or the current passing rent pa as at the review date, the reviewed rent could be quite dramatic..
I have recently acted for clients where the passing rent where the landlord’s surveyor could easily see the quoting rent increase to £30,000 pa when the next review fell due in Dec 22.
However after serious discussion based on a proper analysis of the relevant comparable evidence duly adjusted for condition, aspects, lateral space, lift etc – a settlement was reached fair to both sides at a discount of a third.