Rental Determinations - An Avoidable Evil

By Aldo Galante July 23, 2018

Are you having difficulty reaching agreement regarding a fair market rent with your landlord or tenant? If yes, you are likely looking down the path of a rental determination.

Fair Market Rent With Rental Determination

In my experience, this is something best avoided if at all possible and should only be considered as a last resort option.

Rental determinations are expensive (generally upward of $5,000), they take considerable time (2-3 months), they damage relationships between landlords and tenants and there is always the risk you will not be pleased with the determined outcome.

Most commercial Leases set out the process for Market Rent Reviews and how and when a rental determination is required.

If the landlord and tenant are unable to agree on rental and unable to agree on a choice of valuer themselves, they may refer to one of the below organisations to assist them in appointing a Specialist Retail Valuer:

• Australian Property Institute, or

• REIV, or

• Victorian Small Business Commissioner

It is a good idea to weigh up your options before requesting to appoint a Specialist Retail Valuer. By law, the cost of the valuation is divided equally between the landlord and tenant, however the cost of the commercial property valuation may be high relative to the disputed rent.

Commercial Rent Negotiation and Compromise - Long Term Investment

You may find that the issue could be resolved by further negotiation and compromise. It is always more empowering and better for long term relationships if tenants and landlords can reach agreement amongst themselves, rather than deferring to expensive third parties.

VCAT has handed down a number of decisions regarding the appointment of a Specialist Retail Valuer, a list of which are available on the Victorian Small Business Commission’s website here.

It is important to get the right advice and take emotion out of the dispute. Get a second opinion from our Property Managers here or feel free to call to discuss your pending review before it becomes a prolonged expensive and potentially unsatisfactory result.

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Aldo Galante

Written by Aldo Galante

For over 30 years, Aldo has been at the forefront of Australia’s fast-evolving property industry. He served as President of the prestigious Australian Property Institute (Vic), providing determinations on rent-reviews and valuations

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