Rent review refers to the process by which the rent payable under a commercial lease is reviewed and potentially adjusted during the lease term.

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Table of Contents

  1. What are commercial lease rent review clauses?
  2. What is a fair commercial rent increase in the UK?
  3. What are the different methods of rent review for commercial leases?
  4. When will you have a rent review?
  5. Rent review notice and procedure
  6. Rent reviews and dispute resolution
  7. Need Legal Advice & Assistance?

What are commercial lease rent review clauses?

Rent review clauses in commercial property leases are provisions that allow for periodic adjustments to the rent paid by the tenant. These clauses are commonly included in lease agreements for commercial properties, such as office spaces, retail units, or industrial premises. Rent review clauses are intended to ensure that the rent reflects current market conditions and maintains a fair balance between the landlord and the tenant over the lease term.

The primary purpose of a rent review clause is to provide a mechanism for adjusting the rent during the lease term. This allows the landlord to increase the rent to reflect changes in the property's value or prevailing market rents.

What is a fair commercial rent increase in the UK?

Generally, landlords increase rent annually by 3-5%, whereas some landlords may opt for a lower rate. There is no fixed percentage or standard increase rate as it depends on the agreement between the landlord and the tenant.

The amount of fair commercial rent increase varies depending on various factors, such as location, demand, and state of the property. It is always best to negotiate a reasonable rent increase that both parties agree with. If you are a tenant, it's essential to research the prices for similar properties in the area before negotiating with your landlord.

What are the different methods of rent review for commercial leases?

There are different methods of determining the revised rent, and the specific method will be outlined in the lease agreement. The most common methods include:

  • Open market rent review clause: This clause allows the landlord and tenant to negotiate the rent increase based on the current market rent in the area.
  • Index-linked rent review clause: This clause automatically increases the rent charged for the property in line with a specified index, such as the Retail Price Index (RPI).
  • Stepped rent review clause: This is where both parties agree to a fixed increase of rent at pre-agreed times (for example, a £500 increase each year).

When will you have a rent review?

Rent reviews typically occur at specified intervals within the lease, often every 3 to 5 years. The exact frequency and timing of the reviews are negotiated and agreed upon between the landlord and the tenant when the lease is initially signed.

Rent review notice and procedure

The lease will specify the notice period and the procedure to be followed for initiating a rent review. Both the landlord and the tenant usually have the right to serve notice to initiate the process, and negotiations may take place between the parties or their representatives.

Rent reviews and dispute resolution

In case of a disagreement regarding the revised rent, the lease may outline a dispute resolution mechanism, such as appointing an independent expert or going to arbitration. This helps to resolve any disputes that may arise during the rent review process.

It is important for both landlords and tenants to carefully review and understand the rent review clauses in their lease agreements, as they can significantly impact the financial obligations and expectations of both parties.

Seeking professional advice from a commercial lease solicitor is recommended to ensure a clear understanding of the terms and implications of the rent review clauses. For legal assistance, please call us today at 020 3417 3700.

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