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Business rent increases
This page aims to inform smaller businesses of their rights and responsibilities when faced with a rent increase. It offers general guidance on some of the key issues and sign-posts to sources of further information and support.
It is not intended to be expert advice. Each case will have its own background and specific circumstances and the Council would always recommend that a tenant seek professional advice from accredited surveyors and solicitors.
1. Know your rights
It is not unreasonable for a landlord to increase rent at the end of a tenancy. The amount could reflect inflation, a rise in property values, local demand for space or historically low rent being brought in line with surrounding properties.
The reasons given should be transparent and reasonable, and ideally both parties will reach an agreement on a reasonable and sustainable increase.
It is not reasonable for a landlord to tell their tenant that their rent will be going up significantly at short notice and with no offer of negotiation.
By law, a landlord must give one months’ notice before increasing rent, if their tenant pays their rent on a weekly or monthly basis. However, considerate landlords often provide a longer notice period, and will sometimes offer stepped rent increases over a longer period of time to allow their tenants to plan for and manage the increase.
2. Understand your circumstances and negotiate
When faced with a rent review it’s important to consider the following factors:
- ask your landlord how they’ve have calculated the new rent amount
- is the proposed rent consistent with open market rental values for similar properties in your area? You can check this on commercial letting websites or by ringing around your local commercial letting agents
- the open market rental value will be affected by the property’s current planning ‘use class‘. Ensure the landlord’s calculation is based on the current / permitted use and not a projection of what they might hope to achieve from a different use
- have you made any improvements to the property that could have increased the property value? You might be able to use this to your advantage in your negotiations
- have you been a good tenant in terms of fulfilling your obligations and paying your rent on time? Detail the positive aspects of your tenancy in the property and include the impact you have on the local community, especially if you feel you provide an essential or popular resource. Most landlords want a tenant who is successful and likely to stay in the property for a number of years
- has your landlord fulfilled all their required obligations during your tenancy? If they haven’t you should consider highlighting this in your negotiations
- if you don’t have the time or resource to research prior to negotiating with your landlord then consider hiring a chartered surveyor to compile evidence and make a recommendation on what the rent should be. Some will also handle initial negotiations with your landlord on your behalf
- openness in negotiations works both ways. Your landlord may ask to see your books when discussing what a reasonable rent increase should be. In most circumstances this is a fair request
If you’ve tried to have an open discussion with your landlord and feel their demands are unfair, you can contact a solicitor to go through your lease and provide advice on next steps. However, you must make yourself aware of any legal obligations on you as a tenant that you might be obliged to undertake within certain periods of time either defined within your lease or in wider property law. It is rarely beneficial to take a long time in dealing with matters in contractual negotiations.
Further information and advice on hiring an accredited surveyor or solicitor
- government advice on business premises
- 1954 Landlord and Tenant Act
- Royal Institute of Chartered Surveyors
- The Law Society
3. Use class
Each property has a ‘use class’ which, under planning law, states what business activity is and isn’t allowed to take place there. Should a landlord want to change the business, eg from a car mechanic (B1(c) – business, light industrial) to a coffee shop (A3 – restaurants and cafes), they would need to apply to the local planning authority for permission.
Changing use class can be a complex and lengthy process and landlords have to demonstrate a clear need for the change. Also, local councils often designate that premises in certain areas are only allowed to be used as certain classes. As such a landlord would not necessarily be allowed to bring in a new business type.
Landlords will sometimes try to justify a steep rent increase in one property by comparing it to higher rent being paid from a similar property elsewhere, eg a railway arch being used as a garage (B1) compared to a railway arch being used as a bar (A4). However, the planning application to change the use from B1 to A4 may not be approved, so their justification to raise the rent holds no weight and is speculative at best.
It is advised that tenants understand their use class and whether the premises they operate from is in a special policy area that safeguards and prioritises industrial or employment-generating uses. Hackney has several such areas in an effort to sustain and encourage a mix of businesses in the borough.
For more information on planning policy areas in Hackney, see our page on local development management.
4. Check eligibility for business rates support
Last year many businesses in Hackney had their business rates increased. This is because central government revalued all business premises. The Council has nothing to do with setting business rates, it simply collects them on behalf of government.
Some businesses which have had their business rates increased may be eligible for discounts or support schemes. To find out more visit business rates.
5. Help to find a new property
If you and your landlord can’t agree on a new rent, there may be other premises you could move to. In addition to registering with local commercial letting agents you can register your property search on Invest in Hackney. This is a Council-run initiative aimed at retaining and attracting businesses into the borough.
Once registered, your details will be shared with some of the commercial agents in Hackney, local developers building new commercial units and our Economic Regeneration Team.
You can also browse the availability of Council owned commercial property stock on our commercial property page.