Commercial rent review

A commercial rent review is a process outlined in many commercial leases that allows for the adjustment of rent at specified intervals during the lease term.

The purpose of a rent review is to ensure that the rent reflects current market conditions, balancing the interests of both the landlord and the tenant.

Given the potential financial implications, navigating a rent review requires a clear understanding of the lease terms and the relevant market factors. At Moore Barlow, our experienced solicitors provide expert advice and representation to help you manage the rent review process effectively, whether you are a landlord or a tenant.

What is a commercial rent review?

A commercial rent review is a mechanism built into a lease agreement that allows for the periodic adjustment of rent, typically every three to five years. The review can result in the rent being increased, decreased, or, in some cases, remaining the same, depending on the terms of the lease and current market conditions.

The process is intended to ensure that the rent remains fair and reflects the property’s value in the prevailing market. Rent reviews are often based on “open market rent,” which is the rent the property would likely achieve if it were available on the open market at the review date.

How often should commercial rent be reviewed?

Commercial rent is typically reviewed every three to five years, depending on the terms outlined in the lease agreement. This frequency allows the rent to be adjusted to reflect current market conditions, ensuring it remains fair for both the landlord and the tenant. The specific intervals for rent reviews should be clearly stated in the lease, providing both parties with a predictable schedule for potential rent adjustments.

Types of rent reviews

There are several common types of rent review clauses that may be found in commercial leases:

1. Upward-only review: This is the most common type, where the rent can only be increased or remain the same, never reduced, regardless of market conditions.
2. Upward and downward review: In this type, the rent can be adjusted upwards or downwards, depending on market conditions, ensuring the rent reflects the true market value.
3. Index-linked review: Rent is adjusted according to an index, such as the Retail Prices Index (RPI), which measures inflation. This ensures that rent increases in line with inflation but may not directly reflect changes in the rental market.
4. Stepped rent: The rent increases at predetermined intervals and amounts, as agreed in the lease, providing predictability for both landlord and tenant.

Can commercial rent increases be refused?

Yes, commercial rent increases can be refused or challenged, but it depends on the terms of a lease agreement. If the lease includes a rent review clause, the landlord is generally entitled to propose an increase based on market conditions.

If it’s believed the increase is unreasonable, it can be negotiated with the landlord or challenged by seeking an independent rent review or through arbitration. It’s essential to review lease terms carefully and seek legal advice to understand rights and options before any refusal is made. Valuation advice from a surveyor is often required.

How we can help

At Moore Barlow, we understand that commercial rent reviews can be complex and sometimes contentious. Whether you’re a landlord seeking to ensure the rent reflects current market value or a tenant aiming to keep costs manageable, our team can provide the expert guidance you need.

For landlords, we can assist in reviewing the lease terms, assessing the current market, and negotiating with tenants to achieve a fair rent adjustment. We work to ensure that your property remains a valuable asset, generating appropriate returns.

For tenants, we help you understand the implications of the rent review clause in your lease and represent your interests in negotiations. Our goal is to ensure that any rent increase is fair and justified, helping you to maintain your business’s financial health.

In cases where an agreement cannot be reached, we can represent you in arbitration or other dispute resolution processes, providing strong legal support to achieve the best possible outcome.