Rent review and vacant possession
Rent review and vacant possession

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

  • Rent review and vacant possession
  • What does the assumption mean?
  • What if the lease is silent?
  • Sublettings
  • Existing sublettings
  • Sublettings contemplated
  • Unlawful sublettings
  • Drafting considerations

The rationale behind an assumption of vacant possession at rent review is to prevent the landlord benefiting from an increase in rent for the premises attributable to the fact that they are occupied by the tenant.

What does the assumption mean?

The effect of the assumption is that:

  1. the tenant is deemed to have vacated or never to have occupied the premises

  2. any sublettings existing at the review date are ignored

  3. the tenant is assumed to have removed tenant’s fixtures (this is why a landlord must include an assumption that the premises are fit for occupation by the hypothetical tenant; otherwise the valuation will factor in a rent-free period to allow for fit-out works to be undertaken)

For the avoidance of doubt, most leases also contain a disregard of previous occupation of the tenant or predecessors in title.

What if the lease is silent?

Where the lease is silent, it has been held that, in the absence of wording to the contrary, a hypothetical letting with vacant possession is the likely intention of the parties.

However, the result depends on the lease provisions and general circumstances, including the commercial purpose of the clause.

A tenant unsuccessfully argued that the rent should be valued subject to subleases on the presumption of reality and because the definition of demised premises could be read to include subleases. The court held that the review

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