If you have entered or are entering into a Commercial lease it is typical that these are granted for three years or more will almost often include a clause providing a rent review at, typically, three or five-yearly intervals. Such clauses can take a variety of forms. The lease may provide for the rent to be increased in line with the Retail Prices Index.
However, it is more usual for the review to be on the basis of the open market rental of the premises let with vacant possession on the same terms as those contained in the lease. Despite considerable pressure from tenants in recent years for an increased use of “either way” clauses, the vast majority of rent review clauses remain “upward only”. This means that from the relevant date, the rent will either remain unchanged or be increased to the current market rent (if that is higher).
Another cause for concern is when a rent review clause allows for the review to be on the basis of a number of assumptions and disregards. It is standard practice to assume that the tenant has complied with its obligations under the lease. However, sometimes the landlord puts forward a clause under which it must also be assumed that the landlord has complied with his obligations under the lease. This is not as reasonable as it can result in the rent being assessed on the basis that the landlord has carried out repairs or provided services when it has not done so.
If you are unclear which terms apply to you or would like to have an agreement checked before you sign please get in touch with Caroline Wilton or Martin Banham-Hall from our commercial property team.