Rent Review

They take place at whatever intervals are agreed in the rent review clause(s) in the commercial lease. Rent reviews typically occur every three to five years, a frequency reflecting the general shortening of lease lengths in recent times. Traditionally UK commercial leases were granted for 20 years or more. Rent review clauses were introduced to combat high inflation levels after World War II and up to the 1960s reviews were at seven or 14 year intervals. Shorter leases of between 10 and 15 years are now more popular with landlords and tenants.

The rent review clause sets out when each review will take place, the method of review, assumptions and disregards to be made when valuing the premises for the purpose of rent review, the procedure to be followed, and provisions for dealing with disputes if they arise. The RICS endorsed, industry-standard, Code for leasing business premises in England and Wales (2007) specifies rent review provisions as one of 10 requirements to ensure that a lease is Code-compliant. Revaluation in the open market is the most common method of recalculating a commercial rent at review date.

When parties cannot agree a new rent, the rent review clause in the lease usually stipulates a procedure for a third party dispute resolution — for example the RICS Small Business Scheme for Rent Reviews.

Poorly conducted rent reviews can lead to financial loss, stalemate in agreeing new rents, and even termination of the lease. Chartered valuation surveyors specialising in commercial rent reviews can act successfully on behalf of landlords or tenants in commercial rent review matters. The key to a good rent review negotiation is preparation.

Rent reviews most typically occur every five years, but don't leave it until the due date to plan your response. The vast majority of rent reviews are 'upward-only' in nature and enable the landlord to benefit from any rental growth that has taken place since the last review. This means if market rents have gone up, then your rent will probably increase too. If rents are static or have fallen, your rent will remain the same until the next review or expiry of your lease. However, any increase is subject to debate and negotiation. Naturally, as a tenant you will be focused on minimising any uplift.