Rent review—onerous provisions

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

  • Rent review—onerous provisions
  • Restrictions on use
  • Repair, reinstate, rebuild
  • Alterations
  • Keep open covenants
  • Break clauses
  • The hypothetical term

Rent review—onerous provisions

Points scored and gloated over when negotiating a lease can bite back when the rent comes up for review. In a weak market, the presence of onerous provisions in a lease can entirely wipe out the uplift in rent that would be achieved by a more reasonably pitched lease. In a rising market, any well-advised tenant seeking to limit rent increases at review will argue for a discount to reflect unfair or burdensome terms.

The purpose of rent review is to adjust the rent payable to reflect changes in market conditions during the term of the lease. Since the relevant market conditions are those that would inform the terms of a new letting at the review date, rent reviews are carried out as a fictional new letting of the actual premises to a hypothetical tenant whose rent bid represents the rent reasonably obtainable in the open market for a lease of those premises. To ensure that the fictional letting is not distorted by the presence or business goodwill of the actual tenant, or by any breach of covenant on its part, the valuer is required to make a number of assumptions and disregards. The extent of those assumptions and disregards should be strictly limited. The valuer is required, wherever practicable, to stick closely to reality. If the valuer is required, by clear wording,

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