Your client Kevin’s Train Spotting Limited holds a 25-year lease dated 01/01/2000 with 5 yearly reviews. The rent passing is currently £92,000 per annum. The Company’s Director has approached you with a view to re-gearing this lease, as at least 7 years are required to obtain a bank loan to expand the business. They are currently proposing a new lease of 25 years from 01/01/22 again with 5 yearly rent reviews. Having reviewed the market, you understand that Market Rent for the property is £105,000. The property is currently yielding 4.5%. The tenant pays tax at 40% and has a sinking fund at 2.5%.

Assess from both the landlord’s and tenant’s perspective and advise Kevin’s Train Spotting Limited on the new rent you feel is appropriate. Discuss the use of dual-rate valuation tables and the criticism that this method does not adequately allow for the replacement of capital invested. Provide outline examples to support your arguments.