Law guide: Property

See how we helped Michael

"Fantastic! The legal document I used was so comprehensive and easy to complete. It is very reassuring to know my business now has this level of protection"

Michael S, London

Rent reviews

Rent reviews

Rent reviews

Introduction

One of the most important parts of a commercial lease is the rent reviews provisions.

Commercial leases with a long term contain rent review provisions which set out when each rent review will take place, the method of review, assumptions that are to be made when valuing the premises for the purpose of the rent review, the procedure to be followed and provisions dealing with any disputes.

Traditionally rent reviews are 'upwards only' and it is often very difficult to persuade a landlord to accept that the rent review provisions should also allow for downward as well as upward reviews.

Different methods of review

There are several different methods of calculating a rent review, which include:

  • Indexed-linked: The rent review is linked with an index such as the retail price index.
  • Revaluation in the open market: The rent is calculated based on the current market rate at the date of the rent review. This is the most common form of rent review.
  • Turnover or profit rents: The amount of the rent review is linked to the tenant's turnover of profit.
  • Premium rents: The tenant pays a premium on the current market rent so that the landlord agrees to conduct fewer rent reviews during the term of the lease (or no rent reviews at all if the premium is sufficient).
  • Fixed increases: The increase to the rent for each review is fixed at the commencement of the lease.
  • Sub-lease rents: The rent increase is linked to the rental income generated by sub-letting the premises.

Assumptions and disregards

When calculating a revaluation in the open market, certain hypothetical assumptions are made about the lease for the purposes of the valuation. Examples include:

  • The premises are vacant
  • The premises are fit for their use
  • The lease has a term which is preferred by tenants based on the current market conditions
  • No premium is paid or a rent-free period is granted
  • The tenant has complied with their obligations under the lease

In addition certain matters are disregarded, such as:

  • The tenant's occupation of the premises
  • Goodwill generated by the tenant's use of the premises
  • Improvements made to the premises by the tenant

It is recommended that the parties should obtain the expert advice and assistance of a surveyor when conducting a rent review. If negotiations between the parties or their surveyors breaks down then the parties should follow any dispute resolution terms set out in the lease.

Copyright © 2024 Epoq Group Ltd. All trademarks acknowledged, all rights reserved

This website is operated by Epoq Legal Ltd, registered in England and Wales, company number 3707955, whose registered office is at 2 Imperial Place, Maxwell Road, Borehamwood, Hertfordshire, WD6 1JN. Epoq Legal Ltd is authorised and regulated by the Solicitors Regulation Authority (SRA number 645296).

Our use of cookies

We use necessary cookies to make our site work. We would also like to set some optional cookies. We won't set these optional cookies unless you enable them. Please choose whether this site may use optional cookies by selecting 'On' or 'Off' for each category below. Using this tool will set a cookie on your device to remember your preferences.

For more detailed information about the cookies we use, see our Cookie notice.

Necessary cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.

Functionality cookies

We'd like to set cookies to provide you with a better customer experience. For more information on these cookies, please see our cookie notice.