Rent and rent review clauses

Question 1

when can the rent payable be changed?

Answer 1

rent can only be changed if there is a rent review clause in the lease

Question 2

what are the types of rent review clauses?

Answer 2

1. fixed
2. index-linked
3. T’s receipts
4. open market rent review

Question 3

explain a fixed rent review clause

Answer 3

rent increases a specific amount on set date

Question 4

explain an index-linked rent review clause

Answer 4

linked to external index i.e. RPI.

Cap & collar ensures min + max increase (i.e. capped at 5% increase and collared at 2%)

Question 5

explain a T’s receipts rent review clause

Answer 5

linked to financial health of T’s business e.g. profit, subletting income

Question 6

what are the pros and cons of a T’s receipts rent review clause?

Answer 6

Pro = tracks T’s financial health

Con = no increase if performing badly

Question 7

explain an open market rent review clause

Answer 7

rent is adjusted based on valuer’s determination of a fair market rate based on reality + hypothetical assumptions/disregards

Question 8

re: open market rent review clause

what are the common assumptions?

Answer 8

 someone prepared to take lease
 vacant possession
 terms mirror current lease
 T has complied with obligations
 property fully restored if damaged

Question 9

re: open market rent review clause

what are common disregards?

Answer 9

 T’s occupation
 T’s goodwill
 T’s voluntary improvements

Question 10

re: open market rent review clause

what information must be included in this clause?

Answer 10

 upward-only or upward/downward
 frequency (usually 3-5 yrs)
 procedure for agreement (i.e. formal notice or informal negotiations)