Last Updated May 14, 2019

Law and Practice

Contributed By McGuireWoods LLP

Authors



McGuireWoods LLP has a diverse real estate practice of more than 80 lawyers and land use planners in its offices in Tysons, Charlottesville, Richmond and Norfolk, with skills in a wide range of traditional and non-traditional real estate transactions. The firm’s transactional representation spans all aspects of real estate acquisition, development, financing and disposition, including acquisition, sale, leasing and financing transactions, as well as project finance, construction, public-private partnerships, negotiation of local and state incentives and privatization transactions. The team respresents clients around the world on various sides of such transactions, including Fortune 500 companies. The transactional practice is complemented by the firm’s land use expertise, as it frequently handles zoning and land use matters for development projects.

Parties are generally free to negotiate the manner in which rent may be changed or increased. A typical approach is to impose a fixed increase (usually expressed as a percentage of the existing rent) on an annual basis, usually effective on each anniversary of the rent commencement date. Another common approach is to calculate the increase based on the increase in CPI (if any) over the prior year. Parties may also wish for the rent to be fixed for several years at a time, but then for rent to be adjusted every three to five years, or at any time an extension option is exercised.

Parties may also require the rent to be adjusted to the “fair market rental value”. The means of determining the FMV can be negotiated, but the most common approach is some variation of a “three-appraiser” method, where each party selects an appraiser to calculate the FMV, and if they cannot agree then the two appraisers select a third appraiser, and the FMV is the average value of the three calculations, or the median value, or the value selected by the third appraiser, or some other variation on the foregoing. Adjustments of base rent for a renewal period are often determined in this manner.

McGuireWoods LLP

1750 Tysons Boulevard
Suite 1800
Tysons, VA 22102-4215

+1 703 712 5000

+1 703 712 5050

info@mcguirewoods.com www.mcguirewoods.com
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Authors



McGuireWoods LLP has a diverse real estate practice of more than 80 lawyers and land use planners in its offices in Tysons, Charlottesville, Richmond and Norfolk, with skills in a wide range of traditional and non-traditional real estate transactions. The firm’s transactional representation spans all aspects of real estate acquisition, development, financing and disposition, including acquisition, sale, leasing and financing transactions, as well as project finance, construction, public-private partnerships, negotiation of local and state incentives and privatization transactions. The team respresents clients around the world on various sides of such transactions, including Fortune 500 companies. The transactional practice is complemented by the firm’s land use expertise, as it frequently handles zoning and land use matters for development projects.

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