Early Determination of Market Rent in Retail Leases
Introduction
In the realm of retail leases, it is common for agreements to include an option for tenants to renew the lease on identical terms. However, these leases may also stipulate an adjustment in rent to align with the prevailing market rates. Under the Retail Leases Act 1994 (the Act), tenants are endowed with the right to request an early determination of the new market rent, thereby gaining clarity before committing to an extended lease term.
Requesting an Early Determination
Timeframe: The tenant is required to submit a written request for an early determination of the current market rent within a window of three to six months preceding the final date on which the lease renewal option can be exercised.
Agreement Process: The determination of the new rent can be achieved through mutual agreement between the tenant and the landlord. In instances where an agreement is elusive, the appointment of a specialist retail valuer becomes necessary to ascertain the market rent.
Engaging a Specialist Retail Valuer
Appointment Procedure: In the event of a deadlock between the tenant and the landlord regarding the market rent, either party may initiate the appointment of a specialist retail valuer to conduct an impartial assessment.
Cost Considerations: The engagement of a specialist retail valuer entails significant expenses. Thus, it is prudent to consider this option only if there is a substantial discrepancy between the tenant’s and the landlord’s rent expectations.
Valuer’s Assessment Criteria: The Act delineates the specific factors that the specialist retail valuer must evaluate when determining the market rent.
Review Mechanism: Should there be any dissatisfaction with the determination rendered by the specialist retail valuer, the Act provides for a review mechanism. Either the tenant or the landlord may request a reassessment of the valuer’s decision.
Conclusion
The early determination of market rent is a critical aspect of retail lease agreements, offering tenants a measure of certainty before renewing their lease. By understanding the procedural requirements and cost implications of engaging a specialist retail valuer, tenants and landlords can navigate this process more effectively.
Contact Information
For further information, please contact:
Email: info@marchesepropertyvaluations.com.au