Headline rents

The following Property practice note provides comprehensive and up to date legal information covering:

  • Headline rents
  • What is a headline rent?
  • Inducements available in the market at the time of review
  • The presumption of reality
  • Clear and unambiguous wording required
  • An onerous provision?

Headline rents

What is a headline rent?

In a falling market, landlords frequently offer tenants financial inducements to take a lease in order to maintain the level of rent stated on the face of the lease. The inducement could be:

  1. reduced rent for a period

  2. a capital contribution to the costs of fitting-out, or

  3. a rent-free period which is a pure incentive rather than one for fitting-out

The higher level of rent, which a tenant is willing to pay after taking account of the inducement given to him, is a headline rent.

This approach has benefits for the landlord:

  1. it better protects the capital value of his investment than the lower rent that would be shown if no incentive had been given to the tenant to accept the higher figure

  2. it is regarded as a better platform for an upwards-only rent review and as a more attractive prospect for funders

A landlord of a multi-let building such as a shopping centre may also want to keep up the headline level of rent to use as comparable evidence in an attempt to achieve higher rents on rent reviews and new lettings of other premises in his building.

Inducements available in the market at the time of review

Inducements being offered in the market at the date of the rent review should be taken into account in the

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