Real Estate Update: Rent Reviews – Reviewed

Now is a particularly relevant time to consider commercial lease rent review provisions due to: 

1. improving economic conditions resulting in increases in market rents;
2. legal developments regarding upward only rent review clauses; and
3. five years passing since the ban on upward only rent review clauses in new leases.

Rent review clauses and their operation are of equal interest and importance to landlords and tenants who are approaching rent reviews in existing leases and negotiating a new lease containing rent reviews.

A landlord and tenant set out the agreed terms for occupation of property in a lease. If the term is for more than a few years, the landlord will want to vary the rent payable, usually every five years. Previously, the landlord would insist on upward only reviews but these were banned in 2009. For any leases after the effective date, most reviews will be based on market conditions.