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  1. #1
    Join Date
    Oct 2014
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    Auckland
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    40

    Default Commercial lease renewal rent raise

    Time for my tenant's lease to be renewed... I suppose I'm gonna have to cough up another grand for the lawyer to update the contract grrrr. How do you guys work out how much to raise rent by?

  2. #2
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
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    478

    Default

    Quote Originally Posted by Merlot Mike View Post
    Time for my tenant's lease to be renewed... I suppose I'm gonna have to cough up another grand for the lawyer to update the contract grrrr. How do you guys work out how much to raise rent by?
    What does the lease say

  3. #3
    Join Date
    Oct 2014
    Location
    Auckland
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    40

    Default

    Quote Originally Posted by Beano View Post
    What does the lease say
    Just that the rent can't be raised by more than 8% at once.

  4. #4
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    7,335

    Default

    The normal (formal) approach is to have a valuer come along and do a valuation for rental purposes for you.

    So they look into recent leases of similar properties in the area and come up with a rental figure for you.

    But of course it costs money.

    Then you take that to the tenant and say "The rent will be going to this level, and here is my valuation report as evidence."

    The tenant can either agree, or they can commission their own valuation.

    Or, what normally happens is a bit of negotiation goes on.

    And in fact, if it's a small tenancy, the informal way to go is to say to the tenant "How do you fell about a $x per annum increase?" and negotiate...

  5. #5
    Join Date
    Oct 2014
    Location
    Auckland
    Posts
    40

    Default

    Quote Originally Posted by Davo36 View Post
    The normal (formal) approach is to have a valuer come along and do a valuation for rental purposes for you.

    So they look into recent leases of similar properties in the area and come up with a rental figure for you.

    But of course it costs money.

    Then you take that to the tenant and say "The rent will be going to this level, and here is my valuation report as evidence."

    The tenant can either agree, or they can commission their own valuation.

    Or, what normally happens is a bit of negotiation goes on.

    And in fact, if it's a small tenancy, the informal way to go is to say to the tenant "How do you fell about a $x per annum increase?" and negotiate...
    It is indeed a small tenancy so I think the informal approach might work well. The lease was put in place two years ago so perhaps a 3% increase would be reasonable.

  6. #6
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    7,335

    Default

    Yeah this is what I often do.

    3% is certainly reasonable.

    And for the renewal, I often do that via email. As long as you have something in writing...

    But I stress it's for the smaller tenancies. When big money is involved, the formal process is safest.

  7. #7
    Join Date
    Oct 2014
    Location
    Auckland
    Posts
    40

    Default

    Quote Originally Posted by Davo36 View Post
    Yeah this is what I often do.

    3% is certainly reasonable.

    And for the renewal, I often do that via email. As long as you have something in writing...

    But I stress it's for the smaller tenancies. When big money is involved, the formal process is safest.
    Your advice is much appreciated. Do I need to involve my lawyer or can a lay-person such as myself simply update the relevant details in the existing lease?

  8. #8
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    7,335

    Default

    I don't even change the lease agreement...

    They're picking up a renewal in the exisiting lease agreement right?

    If so, just get the tenant to agree to an email saying they will renew, with everything being the same, but the rent will go to $x p.a.

  9. #9
    Join Date
    Oct 2014
    Location
    Auckland
    Posts
    40

    Default

    Quote Originally Posted by Davo36 View Post
    I don't even change the lease agreement...

    They're picking up a renewal in the exisiting lease agreement right?

    If so, just get the tenant to agree to an email saying they will renew, with everything being the same, but the rent will go to $x p.a.
    Yes that is correct.. brilliant! Cheers.

  10. #10

    Default

    relatively new at this but done two rent reviews so far and I found out that ff there's enough comparable to lease around then it's not too difficult to work out a comparable lease per m2 that is about market levels. If that's not the case then a friendly real estate agent who do leasing tend to have lots of examples to assist. I've found they're willing to help as they want your business when it comes time for a new tenant. I did both.

    On documenting the rent review - checked with my lawyer and a signed letter is sufficient. Scan and send as a pdf - tighter than an email. My tenants were fine with this as well as according to my lease agreements they had to pay the legal costs.


 

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