We all like stability, consistency and reliability. When you put your faith in professionals to resolve disputes, especially rent the last thing you need is confusion. Well, that is what is happening right now amongst the very people that are some of the rent review decision-makers. Some of the Independent Assessors, PIRRS experts and rent Arbitrators are very clued up and adopting the latest thinking. The key, which they have grasped, is the application of the necessary profits test rent valuation to COVID-19 and all of its trade problems going forwards. Logical progressive and sympathetic thinking to ensure correct rent settlements. The big problem is that there is an alarming number of “professionals” who seem to have no idea how to handle the situation. A genuine headless chicken scenario.
We have examples (all of whom must be nameless for tact sake and tribunal confidentiality) of waiting to see what might happen, maybe for six months (!) thinking of delaying rent reviews, hoping that “market evidence” will come out of the woodwork (not a chance in a dead market). Even placing reliance on market transactions from last year pre-COVID-19. None of those past rent agreements reflect the current trading reality and to pretend otherwise is pure folly. Basically anything but tackle the necessity of a forwards looking profits test rent valuation. This is what is laid out plain and simple in the RICS guidance notes, particularly the definition of FMOP or Fair Maintainable Operator Profit (see previous newsletter article here).
Any capable valuer with trade experience and a good grounding in the profits test should be able to chart a sensible course for future trading that both parties can understand. Yes, this is a risky business but still well within a professional’s capability if he is up to speed. You are quite entitled to ask the person sitting in judgement as to how he is going to shape his calculations and on what basis to account for the ongoing effects of COVID-19. If you don’t like the answer you can, in total confidence, refer back to us for a free candid overview. This will help put things in perspective. The very last thing you need is for the rent valuation to be an expert’s damage limitation exercise to cover his own backside being well out of his depth and not knowing what to do.
You have been warned!