Commercial Rent Review Notices: What Landlords and Tenants Need to Know
A rent review notice is a formal notification, typically triggered by the landlord, that triggers the rent review process. It proposes a revised rent and initiates negotiations.
A valid rent review notice typically includes:
- The rent review date (as specified in the lease);
- The current rent and the proposed new rent;
- The basis for the proposed increase or decrease (usually “open market rent”);
- A reference to the rent review clause within the lease;
- An invitation for the tenant to respond or negotiate.
Some leases also permit tenants to initiate the review by serving notice if the landlord does not do so within a certain timeframe.
What Happens After a Rent Review Notice Is Served?
Once a rent review notice is issued:
- The tenant may agree to the proposed rent;
- The tenant may negotiate, often with the help of a chartered surveyor;
- If no agreement is reached, the lease usually provides for third-party determination, by way of arbitration or an independent expert.
Importantly, once the rent is agreed or determined, it is backdated to the review date, meaning arrears (or rebates, in some cases) may become due.
Tips for Landlords and Tenants
For Landlords:
- Review the lease well in advance of the review date(s).
- Obtain professional advice to support your proposed rent.
- Serve the rent review notice in accordance with rent review clause within the lease.
For Tenants:
- Understand your lease’s rent review provisions before signing the lease and keep in mind throughout the term of the lease
- Engage a surveyor to access on whether the proposed rent reflects the open market rent as at the rent review date.
- Don’t ignore the notice – seek commercial property advice from an experienced chartered surveyor and respond to the notice.
Final Thoughts
Rent review notices are a critical part of the rent review process in commercial leases. It is important to understand how rent reviews work and how to correctly handle the issuing or responding to the notice. Both Landlords and Occupiers should seek professional advice before taking action.
Associate Director
