Understanding the rent review process in England for new real estate investors

Understanding the rent review process is essential for landlords aiming to maintain a fair rental income in respect of their commercial property portfolio. This guide outlines the key steps and considerations involved. We have assumed that the rent review provisions are on standard terms, and the review is an open market review (rather than a RPI or CPI review). Our comments below are subject to a detailed review of the specific lease terms.

How does the rent review process work?

1. Landlord should seek advice

The landlord will typically speak to a property solicitor to understand the rent review provisions in the relevant occupational lease. The landlord will then consult a lease advisory surveyor, an expert who assesses the current market rent based on comparable properties and lease terms.

2. Landlord proposes new rent

A notice is sent to the tenant proposing a new rent figure.

3. Negotiation

The landlord and tenant attempt to agree on the new rent. If successful, they sign a short document called a rent review memorandum to confirm the agreement.

4. If they can’t agree

If no agreement is reached, then either party can refer the matter to an independent third party to determine. The lease will govern the terms of the third parties' appointment, including whether they are to act as an independent expert or an arbitrator.

How is the new rent decided?

The new rent is typically determined by whichever is the highest of:

• The current rent.
• The market rent (based on similar properties).

A lease advisory surveyor helps calculate the market rent using the lease terms.

At this juncture, it is worth noting the Government is proposing introducing a ban on upwards only rent reviews on commercial leases. This would mean that the new rent would be equal to the market rent (whether that is higher or lower than the current rent). For more details see this article.

When can you start the review?

You can start the rent review at any time, but if you cannot agree the rent, then usually, you must wait until the rent review date is not less than two months away, before appointing an independent third party.

What if the rent isn’t agreed on time?

The tenant continues paying the current rent. Once the new rent is agreed or determined, they must pay the difference plus interest within a specified number of days.