Reply: 1
From: Kristine .
Hi, Louie
In the absence of details, I can only make some general comments on the matter:
It seems that the tenant came with the property, which you bought subject to the existing lease. For starters, you should read and be very familiar with the lease document.
Legislation is more powerful than contractual leases and you should also become familiar with the relevant legislation in your State, but generally speaking once the fixed term of the lease expires the tenancy becomes periodic ie month to month, but otherwise the terms and conditions of the original lease continue to apply.
The lease will have conditions regarding the frequency of rent review, which party determines the rental and what notice must be given, what course of action the other party may take, what to do in the event of a dispute and so on.
Some leases have ratchet clauses, others relate to CPI, others to market review.
Leases should have an arbitration clause, usually being that in the event of a rental dispute, an independent valuer is appointed and both parties agree to abide by the valuers recommendations, with the expense being shared by both parties.
As a commercial landlord of retail property you should buy a copy of the relevant retail tenancies act for your state (for starters, look it up on your state govt website). Legislation will require a minimum period of notice of any increase. You may find that one month is not enough, usually it is 90 days notice, which gives everybody time to determine if the increase is fair and equitable in the circumstances.
The question to ask yourself is 'do I want the tenant or do I want an empty shop'? No matter how busy a shop may appear to be their margins may be slim, and any increase in rent may cause them to rethink their business plans. Never mind theoretical 'below market as per valuation', if there are empty shops nearby it is those vacancies which act as a rental moderator in the market.
Louie, I wish you a long and happy career as a commercial landlord. In many ways commercial property has advantages over residential, but it is also more fragile. We 'have' to have somewhere to live, but we don't 'have' to be in business.
Hope the issue is soon resolved amicably
Kristine
