Children’s Day Nursery, Southeast Hampshire
Instruction
I was instructed by an independent children’s day nursery operator to negotiate their rent review of a purpose built day nursery located in Southeast Hampshire.
The landlord had quoted a new rent which was nearly a 50% rental increase, but he refused to engage in any meaningful negotiations. Instead, he began invoicing my client the rent he had quoted, without agreement.
Approach
Following my appointment, I undertook very detailed research of all the day nurseries in the local area. However, due to the very limited number of directly relevant evidence, I had to extend my research to over a 20 mile radius of the premises.
Following my research, I was able to demonstrate that most of the rental evidence put forward by the landlord’s agent, justifying their quoting rent, were not ‘arms length’ open market transactions. Therefore, they should carry little to no weight, as the transactions put forward were largely:
• Indexed (RPI) rent reviews, or;
• Agreements between related parties, where the nursery operator also owned the freehold of the property, or;
• Rents linked to nursery business sales, where the vendor retained the freehold and leased the premises to the purchasing party.
Of the one or two open market transactions that were presented, they dated back over 4 years, so again were of no assistance in establishing the current open market rental value.
I identified several open market transactions, including one that was not widely known in the market. All demonstrated rents significantly below the landlord’s proposed figure.
Furthermore, many of these comparable properties were newer and / or located in more affluent catchment areas, adding weight to my argument that the landlord’s proposed rent was significantly above the provable open market level.
Outcome
Despite negotiations, the landlord remained unwilling to agree a rental figure that reflected a fair and reasonable open market rental level.
I was therefore forced to progress the rent review to the appointed Independent Expert.
I prepared and submitted my Expert Report and Expert Replies to the appointed Expert, whosubsequently determined a revised rent in favour of my client.
Result
The revised rent determined by the Independent Expert represented an increase of just under 25%, which was significantly lower than the nearly 50% increase originally sought by the landlord.
The rent was also below the landlord’s final, 11th hour offer to settle.