Commercial Rent Reviews
Leases of commercial premises usually provide that during the term of the Lease, the Landlord can increase the rent payable. Commercial rent reviews are often after three or five years and almost invariably, they provide that the rent can only go up or remain the same, but not down…
Reviews linked to Market Rentals are the most common type, providing for the parties to reach an agreement, failing which the matter is determined by an independent Surveyor. The Surveyor will fix what the rent should be based on the type of property, its location and the terms of the Lease itself; effectively what the Landlord could get should the property be offered on the open market.
“Retail Price Index” reviews are reviews based on inflation since the date of the last review. They are capable of being ascertained easily and have the advantage of fixing the rent at the level,
pro-rata with inflation, that it was at the last review.
The third, “turnover”, type of review is rare. This can be seen as a disincentive for the Tenant to perform well in its business as the Landlord will indirectly get a share of the increased turnover.
A Tenant should not let a review pass, thinking that the Landlord will forget or that the review will not happen. Usually, the Landlord can “trigger” a review at a later stage and claim the shortfall, sometimes with interest.
Commercial rent reviews are complex and specialist legal advice should be taken when entering into a Lease.
For further legal advice on commercial rent reviews, please contact the Commercial team.