Rent review provisions in commercial
property leases were originally introduced to counter
the effect of inflation during the term of the lease.
A standard rent review clause will generally require
the rent to be reviewed at fixed intervals, usually
five yearly, during the term.
The vast majority of rent review clauses
require the assessment of the open market rack rental
value, at the review date, in accordance with specified
terms.
Some rent reviews are however geared
to the tenant's turnover or profitability, or movement
in the Retail Price Index. In the case of calculating
the market rent for a demised premises, the form of
the review clause will vary from lease to lease.
In general however the clause should
make clear: (i) The review period. (ii) The procedural
steps for having the rent reviewed. (iii) Whether or
not time is of the essence in the service of notices.
(iv) The basis of valuation, i.e. assumptions and disregards.
(v) Any hypothetical terms and conditions to be adopted.
(vi) In default of an agreement, the procedure for the
appointment and determination by a third party surveyor
such as an Independent Expert or Arbitrator. (vii) The
effect of a late review, i.e. from when the rent is
payable and whether interest is payable thereon. (viii)
Whether the rent can be reviewed upwards or downwards.
