Rent review memorandum

A rent review memorandum is a formal document used to record the outcome of a rent review between a landlord and tenant.

It details the agreed-upon rent following a review, ensuring both parties are legally bound by the new terms. This document is vital for clarity, as it formally confirms the new rental amount and any related conditions agreed upon during the review process. Ensuring this document is correctly drafted is essential for avoiding future disputes.

The memorandum typically outlines the revised rent, the effective date of the change, and a confirmation that all parties are in agreement. While this may sound straightforward, it is important that the document adheres to the terms set out in the original lease and reflects the specific details of the rent review negotiation.

What is a rent review memorandum?

A rent review memorandum is the written record of the new rent agreed after a rent review has taken place, ensuring that both landlord and tenant formally agree to the adjusted rent. The document is signed by both parties and becomes part of the official lease documentation, legally binding them to the new terms. It usually includes the revised rent figure, the date from which the new rent applies, and any other relevant adjustments or agreements that were made during the review process.

This memorandum ensures there is no ambiguity or misunderstanding about the outcome of the rent review and helps avoid any future disagreements over rent payments.

How a rent review memorandum is structured

The structure of a rent review memorandum follows a standard format but must be tailored to reflect the specifics of the review and lease. It generally begins with a reference to the original lease, clearly identifying the parties involved—the landlord and the tenant—and the property in question.

Next, the memorandum will state the date of the rent review, followed by the agreed new rent. It will also specify the date from which the revised rent is payable. In some cases, additional clauses may be included to address any adjustments or special conditions agreed upon during the review, such as phased rent increases or caps on future reviews.

Finally, the memorandum requires the signatures of both parties, signifying mutual agreement to the new terms. Once signed, it becomes legally binding and forms part of the lease documentation.

Why a rent review memorandum is important

The rent review memorandum is critical in formalising the agreement reached during a rent review. Without it, there is no formal record of the new rent, which could lead to disputes later on. It ensures that both landlord and tenant have a clear, legally binding document that confirms the new rental amount and terms.

The memorandum also ensures compliance with the original lease, which typically requires that any changes to the rent be documented in writing. By accurately reflecting the outcome of the rent review, the memorandum provides clarity and certainty, reducing the risk of future conflict.

What to consider when drafting a rent review memorandum

When drafting a rent review memorandum, it’s essential to ensure that all key details are correctly captured. The memorandum must clearly state the revised rent and the date from which it takes effect. If the rent review involved any special conditions, such as stepped rent increases or specific review dates in the future, these need to be included.

Additionally, the document should reflect any agreed terms that were part of the original lease, such as upward-only rent reviews or index-linked adjustments. Ensuring that these are included in the memorandum helps protect both parties and ensures compliance with the lease.

Once the memorandum has been finalised, it should be signed by both landlord and tenant. Without these signatures, the document is not legally binding.