A double loss could result for landlords if they sign long leases at below market rentals. Apart from owning a lease at below market levels, the landlord will have to pay rates and taxes that are higher than what the cash flow warrants because the municipal valuation will be higher.
To avoid this Rode and Associates suggests that where long leases are not registered landlords can use either:
- Frequent reversions to market rentals (say, every three years).
- Indexation of the rental to a market-rental index.
Article on Rode's Property News