The importance of understanding Rent Review Clauses
05/12/2024
Although commercial leases are often now of shorter duration than in the past, many lease contracts still contain provisions for the rent to be reviewed.
Rents at review can usually only move in one direction – upwards! It’s therefore important for landlords and tenants to receive the best advice when looking to draft and implement rent reviews. In particular, the specific wording of rent review clauses can have significant implications for rental value; for example, restrictive user or onerous lease length provisions can serve to depress rent values to be assessed. If the parties cannot agree the reviewed rent then it is usual for the lease to enable either the landlord or the tenant to get a 3rd Party appointed to determine the rent – and both landlord and tenant will be bound by any 3rd Party decision. Whether an Independent Expert or Arbitrator is appointed can also have implications for rental outcome.
Some rent reviews may be based on Indexation e.g. CPI or RPI increase. Again, specific lease wording can greatly influence the calculation and so rental outcome.
It is therefore crucial to ensure that when the initial lease is being drafted the advice of an experienced rent review surveyor is sought, by both landlord and tenant.
Should you have a query regarding a rent review please contact Paul Robbins in the first instance so we can establish the best way we can assist.