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Rent reviews provisions in commercial property leases were originally introduced to counter the effect of inflation during the term of the lease. A standard rent review clause will generally require the rent to be reviewed at fixed intervals, usually five yearly, during the term. The vast majority of rent review clauses require the assessment of the open market rack rental value, at the review date, in accordance with specified terms. Some rent reviews are however geared to the tenant’s turnover or profitability, or movement in the Retail Price Index.In the case of calculating the market rent for a demised premises, the form of the review clause will vary from lease to lease. In general however the clause should make clear:
(i) The review period
(ii) The procedural steps for having the rent reviewed
(iii) Whether or not time is of the essence in the schedule of notices
(iv) The basis of evaluation. ie assumptions and disregards
(v) Any hypothetical terms and conditions to be adopted
(vi) In default of an agreement, the procedure for the appointment and determination by a third party surveyor such as an independant
Expert or Arbitrator
(vii) the effect of a late review, i.e. from when the rent is payable and whether interest is payable thereon (viii) whether the rent can be reviewed upwards or downwards.