COMMERCIAL PROPERTY – EXAM NOTES
RENT REVIW
WHAT IS A RENT REVIEW CLAUSE?
Written or verbal clause in a tenancy agreement that provides for how the RENT REVIEW
landlord can increase the rent
WHY IS A RENT REVIEW CLAUSE NECESSARY? Rent reviews should be clear
Beneficial for tenant as enabled them to monitor inflation and foresee any and headline rent review
major increases clauses should not be used.
Power to review rent is not implied at law so review should be dealt with Landlords should on request
expressly in the lease offer alternatives to their
proposed option for rent
WHAT IS ITS MAIN PURPOSE? review priced on a risk-
adjusted basis.
Ensures the amount of rent paid under the lease remains commercially
competitive For example, alternatives to
To be enforceable, clause need only contain the mechanism for increasing the upward only rent review might
rent and does not need to specify by how much and when the rent will include up/down reviews to
increase market rent with a minimum of
the initial rent, or reference to
LANDLORD’S MAIN CONSIDERATIONS another measure such as
annual indexation.
Would want to have rent review in the holding over period in the case of
leases protected by LTA 1954 Where Landlords are unable to
If tenant has sublet the property, landlord needs to consider whether rent offer alternatives, they should
review should take into account the sublease give reasons.
o Sublease can be beneficial for the landlord because it means the direct
tenant is in receipt of a clear income stream Lease should allow both
If landlord has granted a tenant a rent-free period, then the issue of headline landlords and tenants to start
rent would need to be considered. Landlord would want the headline figure to the rent review process
be used
Particularly stringent restrictions on the tenant will affect rent review by
making lease less valuable
TENANT’S MAIN CONSIDERATIONS
Tenant would want to resist an upwards only rent review but realistically in practice this will be demanded by
professional landlords
o Under 2007 code rent should be able to go up and down but there can be a cap on how low it can go
o However, code is guidance not law and therefore professional landlords can simply ignore it
If landlord has granted the tenant a rent-free period, issue of headline rent would need to be considered. Tenant would
want to ensure headline rent was not used
o However in practice a landlord would not actively seek headline rent
RENT REVIEW
Usually every 5 years
Some landlords will try to specify every 3 years but can have an adverse effect on rent review
o Unusual for there to be a rent review clause of less than 5 year term
RENT REVIW
WHAT IS A RENT REVIEW CLAUSE?
Written or verbal clause in a tenancy agreement that provides for how the RENT REVIEW
landlord can increase the rent
WHY IS A RENT REVIEW CLAUSE NECESSARY? Rent reviews should be clear
Beneficial for tenant as enabled them to monitor inflation and foresee any and headline rent review
major increases clauses should not be used.
Power to review rent is not implied at law so review should be dealt with Landlords should on request
expressly in the lease offer alternatives to their
proposed option for rent
WHAT IS ITS MAIN PURPOSE? review priced on a risk-
adjusted basis.
Ensures the amount of rent paid under the lease remains commercially
competitive For example, alternatives to
To be enforceable, clause need only contain the mechanism for increasing the upward only rent review might
rent and does not need to specify by how much and when the rent will include up/down reviews to
increase market rent with a minimum of
the initial rent, or reference to
LANDLORD’S MAIN CONSIDERATIONS another measure such as
annual indexation.
Would want to have rent review in the holding over period in the case of
leases protected by LTA 1954 Where Landlords are unable to
If tenant has sublet the property, landlord needs to consider whether rent offer alternatives, they should
review should take into account the sublease give reasons.
o Sublease can be beneficial for the landlord because it means the direct
tenant is in receipt of a clear income stream Lease should allow both
If landlord has granted a tenant a rent-free period, then the issue of headline landlords and tenants to start
rent would need to be considered. Landlord would want the headline figure to the rent review process
be used
Particularly stringent restrictions on the tenant will affect rent review by
making lease less valuable
TENANT’S MAIN CONSIDERATIONS
Tenant would want to resist an upwards only rent review but realistically in practice this will be demanded by
professional landlords
o Under 2007 code rent should be able to go up and down but there can be a cap on how low it can go
o However, code is guidance not law and therefore professional landlords can simply ignore it
If landlord has granted the tenant a rent-free period, issue of headline rent would need to be considered. Tenant would
want to ensure headline rent was not used
o However in practice a landlord would not actively seek headline rent
RENT REVIEW
Usually every 5 years
Some landlords will try to specify every 3 years but can have an adverse effect on rent review
o Unusual for there to be a rent review clause of less than 5 year term
