Rent review—a practical lease negotiation guide

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

  • Rent review—a practical lease negotiation guide
  • Importance of rent review clauses for landlords
  • Upwards only open market reviews as standard?
  • Rent review—considerations at heads of terms stage
  • Involving the surveyors in rent review negotiations
  • Avoiding headline rent reviews—rent-free periods for fitting out only
  • Triggering rent reviews
  • Defining the review dates
  • Is there a term end review date?
  • When is the review date in the hypothetical lease term?
  • More...

Rent review—a practical lease negotiation guide

This Practice Note discusses considerations for landlords and tenants when negotiating open market rent review provisions in a rack rent commercial lease. It identifies key concerns for each party and factors that impact on valuation. It also suggests possible amendments and considers how the rent review clause interacts with other lease provisions.

Importance of rent review clauses for landlords

Leases with terms in excess of five years will generally contain a rent review provision (unless the parties have agreed a turnover rent or stepped rent increases). A rent review is key for the landlord to maintain the value of its investment, enabling it to benefit from any increases in rental values over the term of the lease. Without it, investor landlords would struggle to sell or fund property.

Upwards only open market reviews as standard?

This Practice Note assumes that the rent review is an open market ‘upwards only’ review which is the norm. An ‘upwards’ only review, fixes the current passing rent as the minimum rent payable following review. This means that in a falling rental market a tenant can end up paying over the market rent for its premises.

While indexation reviews (tying the rent to the rate of increase (typically) to the Retail Prices Index or Consumer Prices Index) are found, particularly where the tenant is in a strong negotiating position

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