What You Should Know About Rent Review in Commercial Leases

There are different types of rent review provisions. The most common and therefore the focus of this article is the open market value review.

What Is an Open Market Value Review?

In an open market review, the rent is adjusted to the market rent assuming (hypothetically) the property would be available to let in the open market on the date of the review.

The rent reviews are normally upwards-only, so the rent will either go up or stay the same, but will never go down.

The rent review clause in the lease will set out the considerations to be taken into account (called 'assumptions') and those to be ignored (called 'disregards') for the purposes of valuation of the rent.

What Happens on the Rent Review?

• The parties may agree the new rent between themselves.
• A dispute can be referred to a third party (usually a surveyor). The lease will specify whether the surveyor will act as an arbitrator or an expert.
• Once the new rent is determined, this will typically be back-dated to the rent review date. If there has been an increase in the rent, the tenant will have to pay the balance and any interest due on it, and then continue to pay the new rent.
• The parties may document the agreement in a rent review memorandum.

To find out more, please contact Aditi Sawjani, who is a Senior Associate in our Commercial Property team on 01923 919 319, or complete the form below.