Commercial rent review guidance for tenants
Do not assume the landlord’s proposal is the market rent
A rent review proposal is a negotiating position. The rent payable must be determined under the review provisions in your lease. Before responding, understand the clause, the valuation assumptions and the evidence supporting the proposed rent.
Check the review mechanism
Review provisions vary. Some reviews are to open-market rent; others use an index, fixed increase or another formula. Open-market reviews normally require a hypothetical letting to be considered subject to assumptions and disregards specified in the lease.
Test the comparable evidence
Quoted rents are not automatically comparable. Differences in size, frontage, specification, location, incentives, lease terms and permitted use can materially affect the evidence.
Negotiating the review
Tenants should normally establish their own evidence-based position rather than negotiating only from the landlord’s figure. If agreement cannot be reached, the lease may contain a third-party procedure.
Get advice early
Early advice can be particularly useful where the proposed increase is significant, the clause is complex, evidence is disputed or third-party referral is being considered.