1. Notification
The rent review process normally begins with formal notification. Typically, the landlord serves written notice upon the tenant, stating the intention to review the rent and proposing a new rental amount, know as a quoting rent. Typically, there is nothing stopping a tenant starting the rent review process.
Tenants beware: A landlord’s delay in initiating a rent review does not mean they’ve lost the right to do so. Typically, the landlord can trigger the review at any time after the review date, and any increase will be backdated to the rent review date —potentially leaving a tenant owing substantial back rent, payable in one lump sum, plus interest.
2. Rent Assessment
Next, both parties – often with the help of surveyors or property professionals – assess for themselves the current market rental value of the premises, often a landlord will do this before serving notice. This involves reviewing the lease, gathering evidence from comparable properties, considering location, size, condition, and recent market trends, in order to establish what the open market rent would be, if the property were re-let on the review date.
3. Negotiation and Agreement
If the tenant believes that the landlord’s proposed rent is too high, both parties enter into negotiations, This is generally the case, as a landlord will present the best evidence to support their case. It is recommended that Professional advisors should be involved to help reach a fair market agreement, reflecting all factors. If the parties reach an impasse and a negotiated settlement cannot be reached, the lease will contain a dispute resolution clause, to refer the review to an independent third party – either an Arbitrator, or Independent Expert, who’s decision will be binding on the parties.
4. Documentation
Once the new rent is agreed (or determined by a third party), the outcome should be formally documented. This is typically done through a rent review memorandum, which record the amount of rent and the effective date. Proper documentation protects both parties and provides a clear record for future reference.
Summary Table: 4 Steps for Rent Review
| Step | Description |
| Notification | One party serves written notice that the rent should be reviewed under the terms of the lease. |
| Rent Assessment | Both parties evaluate current market rent bused upon the lease, comparables and market data |
| Negotiation and Agreement | Negotiate new rent; involve third party if agreement not reached |
| Documentation | Record the agreed rent by way of a memorandum or lease addendum |
By following these four steps, both landlords and tenants can ensure a transparent, rent review process that reflects current market conditions and protects their interests.
Unfortunately, rent reviews are often not this straightforward.
They can frequently lead to disputes—particularly when there is a genuine difference of opinion between the parties, or when one party acts unreasonably.
Can the rent go down? – No. The vast majority of commercial leases contain ‘upwards only rent reviews’, so even if the parties agree that the passing rent is above the current market rent (or determined by a third party) the rent payable cannot be less than the existing rent.
Even a seemingly minor detail can significantly affect the final rental settlement, such as a lease clause, floor area measurement, or interpretation of comparable evidence.
A poorly executed rent review could result in either the tenant to much rent,
or the landlord receiving too little. Therefore, navigating this complex process in a professional, knowledgeable and efficient way is vital to achieve the best possible outcome.
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