As a pub tenant with an imminent rent review, it’s wise to understand what is currently being paid by others in your market. This will help you decide if the new rent proposed by your landlord is reasonable and equip you with evidence to challenge the proposal if necessary.

There are four key ways to monitor rents being paid by your peers, from the most reliable to the least:

Open market deals

The most authentic indicator of rents being paid locally is that agreed for a pub which was openly marketed before going to best bids. The bid selected by the landlord gives an idea of what you should pay as tenant of a similar venue. However, don’t simply take this at face value but consider other factors which may be at play, for example is the tenant getting a large discount on their beer supply from the landlord and therefore likely to be paying a higher rent in exchange? What is the lease length? What is the property’s condition? A tenant who needs to make a big investment in the property to improve its condition is likely to pay a lower rent.

Lease renewal

A rent secured at lease renewal in your market is the next best indicator of what you should be paying.  Where a lease is protected by the Landlord & Tenant Act, the rent will go up or down at the time of renewal to reflect current market values, giving you a clear idea of what that value is.

Rent review

As with lease renewals, a peer’s rent review provides insight into what they’re currently paying. However, these are not always reflective of a local average as many rent reviews do not allow the rent to decrease and, on occasion, the lease will contain clauses that will artificially affect the market rent calculation. They can therefore be considerably higher or lower, as they also take these factors into account.

Arbitrator involvement

Where a landlord and tenant cannot agree a rent, an arbitrator appointed by the Royal Institution of Chartered Surveyors may determine what it should be. This is perhaps the least reliable indicator of a market rent, as the arbitrator can only act on the basis of the arguments put forward by the landlord and tenant. If one party is incompetent, he or she is obliged to prefer some or all of the case put forward by the other, which could be falsely high or low.

Irrespective of which comparison method you use, it’s vital to take into consideration all the other potential contributing factors. Time spent doing your homework now will be rewarded when you know the rent you are paying later is fair and just.

• This content first appeared in The Morning Advertiser.

Further information

Contact Savills Licensed Leisure