Fact sheet 5 - Maximising pharmacy rent
Updated: Nov 19, 2019
Pharmacies which are close to, or integral with GP surgeries are valued by different methods to other types of property and can often command much higher rents than traditional retail properties in their locality. You should always seek professional advice and support when undertaking a rent review or lease renewal with your Pharmacy tenants.
Understanding your Pharmacy Lease
Your pharmacy lease will most likely contain rent review provisions whereby, you (the landlord), will have the right to review the rent periodically throughout the duration of the lease. The frequency of these rent reviews is usually every 3 years, but they can be less or more frequent. Most pharmacy leases have rent review provisions which are on an “upwards only” basis which means there is no risk of your rent reducing if you instigate a rent review.
The two most common types of rent review in pharmacy leases are “market rent” based rent reviews and “index linked” rent reviews. The latter is usually linked to the Retail Prices Index (RPI) and the method of calculating the rent review is typically set out as a formula in the lease.
As well as the rent reviews within your lease, there is also the opportunity to review the rent at the end of the lease when it is time to agree a new lease with your pharmacy tenant. This is called a “lease renewal” and this process involves statutory procedures for which you should also seek professional advice from a solicitor as well as a surveyor.
How do I maximise my Pharmacy Rent?
❑ Check your lease for when a rent review might be due. Some leases have specific timescales for instigating a rent review and if these are missed then the opportunity to increase your rent may be lost for that review. However, most leases don’t have time limits for instigating rent reviews, and it can be possible to go back and undertake rent reviews throughout the duration of a lease, if they haven’t previously been “triggered”.
❑ Increases in patient list size can have a positive effect on your pharmacy rent. Therefore, it is always wise to be aware of the changes to your list size.
❑ If your lease is coming to an end it is important to be pro active in dealing with the “lease renewal”. This is because if your current rent is below market level then that low rent will continue until you take the formal steps to renew the lease. Therefore, in order to attain your higher “market rent” as soon as possible you need to act at the appropriate time towards the end of your current lease (statutory proceedings can be instigated up to 12 months prior to the end of the lease).
❑ Lease renewals and rent review provisions can be complicated, with mechanisms including RPI calculations and Market Rent reviews, so it is always advisable to ask a suitably qualified Chartered Surveyor to check your lease to see if a rent review can be actioned.