Heidi Erlandsen

Beth Sealey

1. What is a commercial rent review?

A commercial rent review is a mechanism commonly included in UK commercial leases that allows landlords to periodically adjust the rent charged to tenants. Typically occurring every three to five years, the review ensures that the rent remains aligned with current market conditions, inflation, or other agreed metrics such as turnover, designed to protect the landlord’s investment while offering tenants a transparent framework for how and when rent may change during the lease term. The process usually involves formal notice, valuation, negotiation, and—if necessary—dispute resolution, making it a critical aspect of lease management for both parties. This blog will discuss the various types of rent review mechanisms, common pitfalls to avoid, and potential changes in the law affecting this area.

2. Rent review mechanisms

Open Market

Rent is assessed in relation to the open market conditions at the time of the relevant review.

The process will normally involve a surveyor being instructed to look at rental values of similar properties in the area and apply those examples, along with a set of assumptions and disregards, to establish the market rent for the property being leased.

This mechanism is fairly common as it tends to result in a fairer outcome for both parties as the increased rent will reflect the current market status and will have been assessed by a professional surveyor so generally acts as a true representation of the rent amount.

Landlords will often want this type of rent review to be ‘upwards only’, meaning that if the market takes a turn, the rent cannot be decreased any lower than the amount of rent payable immediately before the review.

This type of review can be unpredictable depending on the market.

Fixed Increase

The parties decide before the lease is entered into what the rental figure will be on each review. This can be beneficial as both parties will know at the start of the lease what the rent will be through the term and can budget accordingly.

However, a fixed increase will not take account of any market considerations which may affect the rental value, potentially resulting in either party feeling that the rent is an unfair figure compared to the open market.

Index-Linked

The rent is reviewed in line with an inflation index (either the Retail Price Index or the Consumer Price Index).

This approach is generally viewed as being a reliable mechanism for rent reviews and it is a more equitable way of reviewing the rent in line with the economic position at the time of review.

This is becoming a more favourable option recently as it allows for more certainty than an open market rent review whilst still allowing for consideration of economic trends.

Turnover Rent

This mechanism of rent review is most commonly used for retail properties. It links the rent review to the commercial success of a trading tenant whereby a tenant pays a percentage of their turnover rather than fixed monthly rent. The higher the turnover, the higher the rent and vice versa. Calculating the rent can be quite complicated and leads to quite a significant administrative burden as the rent is reviewed frequently.

The suitability of this mechanism will vary depending on the type of tenant (i.e. a well-established company or a start-up independent trader).

3. Collar and cap

Rent reviews can be made subject to a minimum (collar) and/or maximum (cap) increase. The minimum/collar acts as protection for the landlord to ensure that the rent doesn’t fall below a specified amount and the maximum/cap protects the tenant by preventing a steep increases.

4. Importance of legal advice

As with any other provisions in a lease, rent review clauses are legally binding and can significantly impact a party’s financial planning, making it essential to understand their structure and implications. Given the potential long-term financial impact, it is essential for tenants and landlords to seek legal advice before entering into a lease. A solicitor can help identify potentially onerous terms, clarify the review mechanism, and negotiate more balanced provisions.

5. Negotiating Rent Reviews

Negotiating the type of rent review before entering into a lease is a strategic opportunity to shape future financial obligations and will often boil down to the bargaining strength between the parties. Tenants should carefully assess the implications of the different review mechanisms and seek to negotiate terms that best align with their business.

Open market reviews can reflect real-time property values but may introduce unpredictability, while fixed or index-linked reviews offer greater certainty but may not account for market downturns.

Landlords typically prefer mechanisms that protect rental income against inflation or rising market rates, so tenants should be prepared to justify their preferred review option.

Given that a rent review structure can significantly impact long-term viability, it should be a priority in lease negotiations and we would strongly advise the parties to seek early advice from a solicitor and surveyor.

6. Common Pitfalls to Avoid

Failing to respond to a rent review notice within the timeframe specified in the lease can lead to serious consequences, including missing the opportunity to challenge the proposed rent and the landlord imposing a higher rent by default. Advice from a solicitor and/or surveyor should be sought.

Rent review clauses can be complex and vary widely between leases. Misinterpreting terms—such as how market rent is assessed or whether the review is “upwards-only”—can lead to unexpected financial burdens. Tenants should seek legal advice to fully understand their obligations and rights.

Verbal agreements or informal understandings about rent adjustments are risky. If parties reach a settlement on the reviewed rent, it must be properly documented to avoid future disputes or confusion —ideally by way of a rent review memorandum or deed of variation.

Rent reviews often coincide with key lease milestones, such as break clauses or renewal dates. Overlooking these can result in tenants committing to higher rent and missing the opportunity to break/exit the lease or renegotiate terms. Strategic planning around these dates is essential to protect long-term interests.

7. Possible changes in the law

The Government is proposing to insert new provisions into the Landlord and Tenant Act 1954.

Essentially, the proposed changes will put an end to upwards-only rent reviews and this will be a particular concern for landlords as the risk is that rent may actually decrease on a rent review.

The changes have not yet come into effect and will likely be subject to much scrutiny as the bill passes through parliament.

Please note that the contents of this blog are intended as general information only, and do not constitute legal advice. If you are a landlord or a tenant of looking for legal advice on negotiating commercial lease terms, please contact one of our team.

Co-written by Beth Sealey and Heidi Erlandsen