How the review actually works
Most London commercial leases of ten years or more carry a review at year five, though five year leases with a review at year three are common in secondary retail and industrial. The lease sets a review date, a method, and a procedure. On that date the rent is recalculated and, in the overwhelming majority of UK leases, it can only stay the same or go up. That is the upward only rent review, and it is the single most important clause to check.
The most common method is open market review: the parties agree what rent a willing tenant would pay a willing landlord for the property on the review date, on the terms set out in the lease. Index linked reviews tied to RPI or CPI are increasingly used, sometimes with a collar and cap such as 1 to 4 per cent a year. Stepped or fixed uplifts appear in shorter leases where both sides want certainty.
- Open market: negotiated on comparable evidence, upward only in most cases
- Index linked: RPI or CPI, often capped and collared
- Fixed or stepped: agreed increases written in at the outset
- Turnover based: a percentage of trade, seen in shopping centres and some F and B units
The assumptions and disregards that decide the number
An open market review is a hypothetical letting, and the lease tells the valuer what to pretend is true. Typical assumptions include that the property is fit and available to let, that both parties have complied with their obligations, and that a notional new lease is granted for a stated term. Typical disregards include the tenant's occupation, its goodwill, and any improvements the tenant paid for.
These clauses have real money attached. If you fitted out a unit in Shoreditch at your own cost and the improvements are not properly disregarded, you can end up paying rent on your own investment. Equally, if the assumed term is fifteen years when the market is letting on five year terms with breaks, the hypothetical rent may be higher than anything a real tenant would pay. Rent free periods granted in the market are usually assumed to have expired, which is why headline rents on comparables can be misleading.
Evidence, timing and what happens if you disagree
The negotiation turns on comparable transactions: recent lettings and reviews on similar properties nearby, adjusted for size, floor, condition, and incentives. In central London office markets, a difference of a few pounds per square foot across 4,000 sq ft is roughly £20,000 a year, so the analysis is worth doing carefully. Ask your surveyor to show you the effective rent on each comparable, not just the headline.
Check whether time is of the essence in your review clause. In most modern leases it is not, which means a landlord who misses the trigger date can still review later, and interim rent arrears can be backdated with interest. Where it is stated to be of the essence, a missed deadline can be fatal to the review.
If you cannot agree, the lease will name a third party: an independent expert or an arbitrator appointed by the RICS. Application fees start in the low hundreds of pounds, with the third party's own fees and each side's professional costs on top, so most reviews settle before that point. Around three to six months before the review date is the sensible time to take advice.
What tenants and landlords should be doing now
If you are the tenant, dig out the lease and any deeds of variation, licences for alterations, and side letters. A licence for alterations recording that works were carried out at tenant's cost is powerful evidence for the improvements disregard. Consider whether the review is a moment to open a wider conversation: landlords will often trade a lower reviewed rent for a removed break clause or a term extension.
If you are the landlord, serve any required notice properly and in good time, and assemble evidence before naming a figure. An opening proposal without supporting comparables invites a low counter and a long negotiation.
Common questions
Can my rent go down at a review?
Only if your lease allows it, and most UK commercial leases do not. Upward only clauses mean the rent either stays at the current level or increases, even where market rents have fallen.
What happens if the landlord misses the review date?
Unless the lease says time is of the essence, the landlord can usually still trigger the review late and recover the uplift backdated to the review date, often with interest. Check the wording rather than assuming the review has lapsed.
Do I have to pay the landlord's surveyor's figure?
No. The proposed rent is an opening position, not a determination, and it is normal for the agreed figure to land well below it once comparable evidence is properly analysed.