In a lot of deals, especially for long term leases, rent will be reset to “Fair Market Rent.” Following the convention, we’ll call that FMR. This could happen at renewal time or, typically with a long-term ground lease, every 10 or 20 years. Rightly concerned that crystal balls aren’t very good at knowing what the market will look like 10 years or more down the road, landlords and tenants, each for their own reason, often resort to resetting what would otherwise have been a continuation of some stream of fixed annual rent increases, say 3% a year or 10% every 5 years (yes, those aren’t the same increases). Effectively, the lease would say (and we paraphrase, not suggest usable lease language): “on the 10th (or 15th or 20th or 25th, etc.) anniversary of the Rent Commencement Date, Base Rent shall change to FMR. If by the 180th day before that anniversary, the parties have not agreed as to such a FMR, then each party shall designate a Qualified Appraiser, who shall [opine as to FMR]. If they don’t agree, then they shall jointly choose a third Qualified Appraiser… .” [Read more…]