What Is A Commercial Property Rent Review?

Most commercial leases have a rent review clause which provides for the landlord to review the amount of rent the tenant must pay at regular intervals. Given that commercial leases can run from five to twenty five years (or even longer) rent reviews are essential to ensure rent is kept in line with market values.

When will a rent review occur?

The timing of rent reviews will be set out in the commercial lease. Usually, rent is reviewed every three to five years.

What are the different types of rent reviews?

There are several types of rent reviews, namely:

Open market – considers what rent would be charged if the premises were advertised for let on the open market with existing terms on the day of the rent review.
Index linked – the rent increase is linked to a form of index, often the Retail Price Index (RPI).
Fixed increases – a fixed increase of rent is automatically applied on a set date, i.e. £1,500 per year on every March Quarter Day.
Turnover rent – all or part of the rent review is linked to the tenant’s annual turnover.

Should I automatically agree to a proposed rent review increase?

You are under no obligation to immediately accept the increase your landlord is proposing. If your rent review is linked to the open market, you must consider the rent review terms in the lease agreement and do your own research into the amount of rent you would pay on your premises if it was let out on the day of the rent review for identical terms.

What if the landlord and I disagree about a commercial property rent review increase?

Most commercial leases provide that in the case of a rent review dispute, either party can refer the matter to a third party for review by an Arbitrator. If you and your landlord cannot agree on the appointment of a third party, the lease should provide for the President of the Royal Institute of Chartered Surveyors (RICS) to appoint a body that will determine the revised rent increase.

Final words

A rent review can induce worry and stress, especially if it falls during an economic downturn. To ensure your best interests are protected, seek legal advice several months before the rent review date.

Get legal assistance from LawBite

If you are a landlord or a tenant and have questions about your rent review or existing lease or lease renewal you can contact LawBite’s expert commercial property lawyers who can provide strategic and practical business legal advice at all stages of the commercial rent process.

If you are dealing with an issue or dispute from your existing commercial premises, whether freehold or leasehold, contentious or non-contentious, our commercial property solicitors are on hand to advise.

Book a free 15-minute consultation today to discuss your legal issues with our solicitors.

Additional useful information

Break Clause - Four Important Things Tenants Should Be Aware Of

Landlord and Tenant Responsibilities For Commercial Premises

Pain Sharing Can Lead To A Win-Win For Commercial Landlords And Tenants

How Commercial Lease Tenants Can Protect Themselves From Forfeiture

Commercial Lease Agreements: All you need to know
How to negotiate a commercial lease
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