Rent reviews are a standard feature of most commercial leases, yet they are often one of the least well understood provisions. For both landlords and tenants, a rent review can represent either a valuable opportunity or a source of uncertainty, depending on how well the lease has been drafted, and how prepared the parties are. Understanding how rent reviews operate is essential to protecting your financial position and maintaining a constructive commercial relationship.

What Is a Rent Review and Why Does It Matter

A rent review is a mechanism within a commercial lease that allows the rent to be adjusted at agreed points during the term. Commercial leases often run for many years, and without any review clause, the rent could quickly become out of step with current market rates, meaning a loss of income for the Landlord. The purpose of a rent review is to ensure that the rent remains appropriate at the review date, rather than at the start of the lease.

Rent reviews commonly take place on a regular basis or halfway through the term, although this will depend on what was agreed when the lease was negotiated. Both the timing of the review and the method used to assess the new rent are critical and can have long term financial consequences.

Common Methods of Rent Review

There are several different approaches to rent reviews in England and Wales, each with its own advantages and risks.

The most frequently used method is an open market rent review (OMR). Under this approach, the rent is assessed by reference to the level the property could reasonably command on the open market if the property was to be let on a new lease at the review date. This method is intended to reflect up to date market conditions, but it can give rise to disputes where there is limited comparable evidence or where the market is changing rapidly.

Other methods are sometimes used to provide greater certainty or to reflect the nature of the tenant’s business. These include:

  • Fixed increases, where the rent rises by a set amount or percentage at predetermined intervals
  • Index linked reviews, often tied to inflation measures such as the Retail Prices Index, allowing rent to increase in line with economic conditions
  • Turnover based rent, most found in retail leases, where part or all the rent is linked to the tenant’s trading performance
  • A collar and cap on the amount of increase in the rent.

Choosing the right review mechanism at the outset is essential, as it will shape how risk is shared between landlord and tenant over the life of the lease.

Key Lease Provisions of Which You Need to be Aware

The detail of the rent review clause is just as important as the method itself. Leases typically include assumptions and disregards that govern how the rent should be assessed. These may require the valuer to assume, for example, that the property is in good repair or to disregard improvements carried out by the tenant.

These provisions can significantly influence the outcome of a rent review, and poorly drafted or ambiguous clauses are a common source of disagreement. Careful legal input at the drafting stage can help avoid uncertainty and reduce the risk of dispute later on.

The Rent Review Process in Practice

When a rent review is triggered, particularly under an open market review, both parties will either negotiate the rent themselves or instruct surveyors to advise on the appropriate level of rent. Negotiations then take place with a view to reaching agreement.

If agreement cannot be reached, most leases provide for the dispute to be referred to an independent expert or an arbitrator. While this offers a route to resolution, it can be costly and time consuming, which is why early engagement and clear drafting are so important.

Managing Risk and Cash Flow

From a practical perspective, rent reviews have a direct impact on cash flow. Tenants should plan for potential increases and factor these into their business forecasts. Landlords, equally, should be mindful of market conditions when projecting income and managing expectations with lenders or investors.

Monitoring local property market trends well in advance of a review date can help both parties anticipate likely outcomes and avoid surprises.

Common Pitfalls and How to Avoid Them

Many rent review disputes arise not from the principle of the review itself, but from avoidable errors. Common issues include:

  • Ambiguous drafting, which can lead to conflicting interpretations and costly disputes
  • Failure to act in time, where missed deadlines can weaken a party’s position
  • Lack of market awareness, resulting in unrealistic expectations on either side

Seeking advice early and keeping key dates under review can help prevent these problems from arising.

How We Can Help

At Ison Harrison Solicitors, our commercial property team advises landlords and tenants on every aspect of rent reviews, from drafting and negotiation to valuation disputes and resolution. Our focus is on ensuring that lease terms are clear, commercially sensible, and aligned with your wider business objectives.

If you are entering into a new commercial lease or approaching an upcoming rent review, we can provide practical, tailored advice. Contact our team for a no obligation consultation on 0113 284 5000 or commprop@isonharrison.co.uk.