Most commercial leases let the landlord review the rent every few years. How the new rent is worked out depends entirely on the wording of the lease.
The three main types of rent review
| Type | How the new rent is set |
|---|---|
| Open market | What a new tenant would pay for the property on the lease terms, agreed or decided by an expert or arbitrator |
| Index-linked | The rent moves in line with RPI or CPI over the review period |
| Fixed uplift | A set increase written into the lease, such as 2.5% a year |
Upward-only clauses
Many UK commercial leases say the rent can stay the same or go up at review, but never fall. If the market has dropped, the rent simply stays where it was.
Caps and collars
Index-linked reviews often come with a cap, the most the rent can rise, and a collar, the least it will rise. They are usually expressed per year and compounded over the review period.
Worked example
| Item | Figure |
|---|---|
| Current rent | £20,000 a year |
| Review | After 3 years, CPI-linked |
| CPI rise over the 3 years | 12% |
| Cap | 3% a year, compounded = 9.27% |
| New rent | £21,855 a year, because the cap applies |
Work out a review
The Commercial Rent Review Calculator applies the lease terms, including caps, collars and upward-only clauses, to work out the new rent. It comes in the Commercial Management Suite with the lease tracker and other management tools.