How to Prepare for a Commercial Rent Review in London

Start with the lease, not the market

Your lease's rent review clause sets the rules. Read it 12 to 18 months before the review date, ideally with a surveyor. The wording decides how the new rent is worked out, and two London units of the same size on the same street can end up with very different rents because their clauses differ.

Look for these points in particular:

• The basis of review: open market rent, index linked (RPI or CPI, sometimes with a collar and cap), fixed increases, or turnover based.
• Whether the review is upward only. Most older London leases are, so the rent cannot fall below what you pay now, even in a weak market.
• The assumptions and disregards. A typical clause tells the valuer to assume a hypothetical lease term and that the premises are fit for use, and to ignore tenant's improvements and the goodwill you have built up.
• Any trigger notices, counter notices and deadlines, and whether time is of the essence. If it is, missing a date can mean a landlord's proposed figure becomes binding.
• How disputes are settled: an arbitrator or an independent expert, and who appoints them, often the President of RICS.

Build your evidence from real London comparables

The open market rent is argued from evidence: recent lettings, renewals and settled reviews of similar properties close by. In London, value can change sharply over a few hundred metres. A Shoreditch office floor and a City floor ten minutes' walk away can be £20 or more per sq ft apart, and prime West End shop space is measured using Zone A analysis, where the front 6.1 metres carries the highest rate per sq ft.

Useful evidence is recent, ideally from the last 12 to 18 months, close in location, size and specification, and properly analysed. Headline rents often hide rent free periods or capital contributions, so a deal quoted at £65 per sq ft may really be worth nearer £55 once incentives are spread over the term. Your lease's assumptions decide whether those incentives should be stripped out, and this is often where most of the argument happens.

Get the measurements and specification right

Check the floor area is measured correctly. Since a 2 per cent overstatement on a 5,000 sq ft office at £60 per sq ft costs £6,000 a year, it is worth having the premises remeasured under the RICS measurement standards if there is any doubt. Note anything that makes your space worse than the comparables, such as poor natural light, ageing air conditioning, a lack of step free access or a weak EPC rating, which matters more now that minimum energy efficiency rules are tightening.

Plan the negotiation and the timetable

Reviews often settle months or even years after the review date, with the new rent backdated and interest added, sometimes at a rate above base rate as set out in the lease. Tenants should budget for a backdated payment rather than assume the old rent carries on forever. Landlords should be aware that delay can work against them if the market softens.

Most London reviews settle by negotiation. Only a small share go to third party determination, which is slower and more expensive, typically several thousand pounds up to well into five figures depending on complexity and whether there is a hearing. Having credible evidence ready early is the best leverage you have in negotiation, because both sides can see what an expert would probably decide.

When to bring in a surveyor

If the rent is meaningful to your business, it usually pays to appoint a RICS chartered surveyor who knows your part of London before the trigger notice arrives. They can interpret the clause, assemble and analyse comparables, and handle the correspondence so you do not accidentally accept a figure or miss a deadline. Fees vary: some advisers charge a fixed fee, others a percentage of the saving achieved, so agree the basis in writing at the outset.

Common questions