A Rent Review Clause serves the purpose of allowing a periodical adjustment of rent to the current market level at the date of review. The clause within the lease will specify the agreed intervals at which these reviews are to take place, typically every three to five years depending on the term of the lease. A well drafted rent review clause should set 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 lease will specify the basis for the new rent. In some cases, the new level of rent may be set e.g. £10,000 per year or it could be based on an index such as the retail price index. More commonly, however, the new rent will be based on the open market rental value i.e. the rent charged for similar properties on similar leases. The lease may also include terms such as an ‘upwards only’ rent review, allowing the rent to increase only.
Rent Reviews are an important factor to consider when negotiating the terms of a lease and should be considered carefully. For further information please do not hesitate to contact our Commercial Property Department on 0166 266 5394.