Rent reviews are often seen as a routine part of a commercial lease, but they are far more than a simple financial adjustment. They are a formal legal process governed by strict lease wording, deadlines, and procedures.
Whether you’re a landlord or a tenant, understanding the legal framework behind a rent review is essential. Many disputes arise not because of disagreement over rental value, but because of procedural errors that could have been avoided with the right advice at the right time. Small mistakes can have long-term consequences, affecting income, cash flow, and business planning for years to come.
Misunderstanding the Rent Review Clause
One of the most common pitfalls is failing to properly understand the rent review clause in the lease. Each lease is unique, and the precise wording dictates how the review must be carried out. Rent reviews may be based on:
- Open market rental value: the rent that a willing tenant would pay on the open market, often the default in most leases.
- Fixed increases or stepped rents: predetermined increases at set intervals.
- Index-linked formulas: adjustments tied to inflation or other indices.
- Upward-only rent reviews: clauses that prevent the rent from decreasing even if market rents fall.
Misreading or assuming how the rent review should work can lead to unexpected outcomes, such as a tenant facing an increase even during a market downturn due to an upward-only clause. This highlights why a careful, clause-by-clause interpretation is critical before engaging in any negotiations.
Read our complete guide to commercial rent review clauses to learn more.
Missing Key Deadlines
Deadlines in rent reviews are often unforgiving. Leases specify exact timeframes for serving notices and counter-notices, and missing these can have severe consequences.
- If a tenant fails to serve a counter-notice disputing a proposed rent within the lease’s deadline, they might lose the right to challenge the rent.
- If a landlord delays serving a rent review notice, the rent may remain at the current level until a valid notice is served.
Many disputes arise from parties being unaware of or failing to note these key dates. Professionals recommend setting reminders months in advance and engaging advisors early to avoid such pitfalls.
Missing Key Deadlines
Even timely notices can be invalidated by technical errors, which often hinge on lease-specific requirements. Common mistakes include:
- Serving notices on the wrong party, such as sending a notice to a management company instead of the leaseholder.
- Using incorrect language or failing to include required information specified in the lease.
- Not following stipulated delivery methods, such as registered post or personal service.
Courts and tribunals generally interpret these requirements strictly. An invalid notice can delay the process, forcing parties to restart the timetable and potentially leading to lost rental income or unnecessary rent freezes.
Misapplying Lease Assumptions and Disregards
Most rent review clauses include assumptions and disregards, rules that set the hypothetical condition of the property for valuation purposes. For example, tenant improvements might be disregarded or included depending on the lease.
Assumptions may also be made about the repairing condition of the premises, even if the actual state differs. Additionally, the hypothetical use of the property is often defined, meaning the valuation must consider a certain use rather than the current or intended use.
Failing to correctly apply these assumptions can distort rental valuations and undermine your negotiating position or legal case in disputes.
Using Poor or Inadmissible Comparable Evidence
Comparable evidence is a cornerstone of open market rent reviews. However, not all evidence is created equal. Common pitfalls include relying on deals that include significant incentives, such as rent-free periods or tenant fit-out contributions, without adjusting for these.
Using outdated or geographically distant comparables that do not reflect current market conditions or lease terms can also mislead valuations. Additionally, comparing properties with differing lease lengths, use clauses, or repairing obligations may produce inaccurate conclusions.
Effective valuation demands comparable evidence that is recent, relevant, and similar in all material respects. Poor-quality evidence can be rejected by arbitrators or expert determiners, weakening your position.
Failing to Follow Dispute Resolution Procedures
When parties cannot agree on a revised rent, most leases specify dispute resolution mechanisms such as arbitration or independent expert determination. Common mistakes include:
- Ignoring or misunderstanding the lease’s prescribed process and timelines.
- Engaging in informal negotiations that inadvertently waive formal dispute rights.
- Failing to appoint or agree on the appointed expert/arbitrator within the specified deadlines.
Non-compliance with these procedures can escalate costs and delay resolution, sometimes forcing parties into costly litigation instead.
Informal Agreements That Aren’t Legally Binding
Informal agreements reached through emails or conversations can create false expectations. Often, these arrangements are not legally binding unless properly documented and signed in accordance with the lease’s requirements.
Relying on informal agreements risks misunderstandings or repudiation, especially if the lease demands formal deed or written documentation. To avoid disputes, all agreements during a rent review should be clearly recorded, ideally with professional advice.
Not Taking Professional Advice Early Enough
One of the biggest mistakes landlords and tenants make is treating rent reviews as informal negotiations rather than formal legal processes. Engaging surveyors and solicitors early allows:
- Detailed review of the lease and rent review clause.
- Timely noting and serving of notices.
- Gathering and assessing comparable evidence properly.
- Advising on assumptions, disregards, and dispute options.
- Managing negotiation or dispute resolution professionally.
Early advice is almost always more cost-effective than reacting after mistakes have been made, especially when deadlines have passed or disputes have escalated to arbitration or litigation.
How ASL Can Assist You With Your Rent Reviews
Trust ASL Chartered Surveyors & Valuers
Rent reviews require legal precision as well as market knowledge. Understanding the lease, meeting deadlines, serving valid notices, and using appropriate evidence are all essential to achieving a fair and defensible outcome.
Avoiding common legal pitfalls helps protect income, cash flow, and long-term business planning. ASL Surveyors provide early, expert guidance tailored to your circumstances, whether you are a landlord seeking to maximise rent or a tenant aiming to protect cash flow.
If you are approaching a rent review, speaking to ASL early can make all the difference: helping you manage risk, avoid costly errors, and negotiate from a position of strength.
Contact ASL today for expert rent review advice and protection.
