A rent review is a lease clause that allows the rent payable under a commercial lease to be adjusted at defined intervals during the lease term. It is one of the most consequential provisions in any commercial lease, directly affecting the income trajectory of the asset for the landlord and the occupancy cost certainty for the tenant.

Most commercial leases run for multiple years. A rent review mechanism ensures that the rent does not remain fixed at the original agreed figure for the entire term, but adjusts according to a method specified in the lease. The method used determines whether the adjustment reflects market conditions, inflation, a fixed formula, or a combination of factors. Getting the rent review structure right at lease negotiation has long-term financial consequences for both parties that are easy to underestimate at the time of signing.

What a Rent Review Clause Covers

A rent review clause in a commercial lease specifies four things: when reviews occur, what method is used to calculate the new rent, how disputes about the reviewed rent are resolved, and whether the reviewed rent can move downward as well as upward.

Each of these elements matters. A rent review that occurs every year using a CPI-linked formula produces very different outcomes over a 10-year lease than one that occurs every 3 years at market rent. The method, frequency, and direction of adjustment shape the financial relationship between landlord and tenant for the entire lease term.

The Four Main Types of Rent Review

1. Market Rent Review

A market rent review is a rent adjustment based on what the premises would achieve if let at arm's length in the open market at the review date.

The reviewed rent is determined by reference to comparable transactions for similar premises in the same location, adjusted for any differences in lease terms, specification, or incentives. The review is typically triggered at intervals specified in the lease, commonly every 3 to 5 years for longer commercial leases, and the new rent is agreed between the parties or, if they cannot agree, determined by an independent valuer or arbitrator.

Market rent reviews are the most commonly used mechanism in commercial office, retail, and industrial leases across most major markets. They align the rent with actual market conditions, which works in the landlord's favour in rising markets and in the tenant's favour in falling ones.

The key negotiating issue in a market rent review is whether the clause includes a ratchet provision. A ratchet clause prevents the reviewed rent from falling below the current passing rent, even if the market has softened since the last review. Ratchet clauses are strongly preferred by landlords and lenders because they protect the income floor, but they can produce rents that are materially above market in a declining market and become a source of significant dispute. The presence or absence of a ratchet should always be confirmed when abstracting a lease, as it materially affects the risk profile of the tenancy.

The RIOO guide on managing lease guarantees and security instruments across a commercial portfolio  explains how lease terms like these affect the scope of security coverage over the lease term. 

2. CPI-Linked Rent Review (Index-Based)

A CPI-linked rent review is a rent adjustment calculated by applying the change in a specified price index, most commonly the Consumer Price Index, to the passing rent over the review period.

The reviewed rent is calculated by multiplying the current rent by the percentage change in the index between two specified dates. For example, if the passing rent is $100,000 per annum and the CPI has increased by 4.2% since the last review, the reviewed rent becomes $104,200. No valuer or market analysis is required. The calculation is mechanical and, if the lease drafting is clear, largely dispute-free.

CPI reviews are common in long-term leases where both parties want cost certainty, in government and not-for-profit tenancies, and in markets where market rent reviews create significant uncertainty. They are also increasingly common in leases to anchor tenants in retail centers where the landlord accepts lower rental growth in exchange for the security of the tenancy.

The key risk for landlords in a CPI-linked structure is that CPI does not necessarily track commercial rental market movements. In a strong market where rents are rising faster than inflation, a CPI-linked lease will underperform relative to market. In a soft market, it provides income protection above what a market review might deliver. Some leases address this by capping and flooring the CPI adjustment, for example specifying that the annual increase will be no less than 2% and no more than 5% regardless of the actual index movement.

A variation of this structure is the fixed percentage increase, where the lease specifies a set annual or periodic increase, for example 3% per year, without reference to any external index. Fixed increases provide complete income predictability but carry the same risk of divergence from market over time.

3. Fixed Percentage Increase

A fixed percentage rent review is a rent adjustment by a predetermined percentage at specified intervals, with no reference to market conditions or any external index.

The reviewed rent is calculated by applying the agreed percentage to the passing rent. If the lease specifies a 3% annual increase and the current rent is $120,000, the new rent after review is $123,600. The calculation requires no expert input, no market evidence, and no negotiation. It is the simplest and most administratively straightforward review mechanism.

Fixed increases are common in smaller commercial leases, retail tenancies, and leases where the tenant has negotiated certainty of occupancy cost in exchange for a longer committed term. They are also used as a bridge mechanism between market rent reviews in longer leases, for example a lease might specify that rent increases by 3.5% annually in years one through four, then resets to market at year five before resuming fixed increases for the next cycle.

The limitation of a fixed increase is identical to the CPI-linked structure: it produces predictable outcomes but does not track market conditions. A fixed increase that looked reasonable when the lease was signed in a low-inflation environment may look very different if market conditions shift materially over the lease term.

4. Turnover Rent Review (Percentage Rent)

A turnover rent review is a rent structure under which some or all of the rent payable is calculated as a percentage of the tenant's gross turnover from the premises, rather than as a fixed amount.

Turnover rent is most commonly used in retail leases, particularly in shopping centers and high street locations, where the landlord takes a share of the revenue generated by the premises as an acknowledgment that the property's value is linked to the trading performance of the occupier. The structure typically combines a base rent, which is the minimum guaranteed rent regardless of trading performance, and a turnover component, which is charged when turnover exceeds a specified threshold at which the percentage calculation produces more than the base rent.

For example, a lease might specify a base rent of $80,000 per annum plus 8% of gross turnover above $1,000,000. If the tenant's annual turnover is $1,200,000, the turnover rent is 8% of $200,000 excess, which is $16,000. The total rent is therefore $96,000 for that period. If turnover stays below $1,000,000, the tenant pays only the base rent.

Turnover rent structures require careful lease drafting around the definition of gross turnover, the treatment of online sales, the audit rights the landlord holds over the tenant's trading accounts, and the frequency of reconciliation. Poorly drafted turnover clauses are a frequent source of CAM-style disputes in retail portfolios.

For context on how these reconciliation disputes develop and how to manage them, see the RIOO guide on how to manage CAM reconciliation disputes.

How Rent Review Frequency Works

Rent review intervals are specified in the lease and are typically annual, biennial, or set at 3 to 5 year intervals depending on the review type and the market.

Fixed and CPI-linked reviews tend to occur annually or every two years because the calculation is mechanical and causes no disruption to the tenancy. Market rent reviews tend to be less frequent, typically every 3 to 5 years, because they require market evidence, expert input in the event of a dispute, and a period of negotiation that disrupts the tenancy relationship.

The review date matters. A market rent review triggered on 1 January will reference comparable market evidence from the preceding months. Missing the review trigger date, or failing to serve a review notice in the manner and within the timeframe specified in the lease, can result in the review being deferred to the next scheduled date or, in some jurisdictions, lost entirely. Tracking review dates accurately across a portfolio is not optional.

The Royal Institution of Chartered Surveyors publishes guidance on rent review procedures and dispute resolution in commercial leases, and provides a useful reference for understanding procedural requirements across different markets.

Upward-Only vs Upward and Downward Reviews

One of the most commercially significant features of a rent review clause is whether the rent can move in both directions or only upward.

An upward-only rent review clause means the rent at review can increase or remain the same, but cannot fall below the passing rent regardless of what the market evidence shows. This structure is strongly preferred by landlords and lenders because it protects the income floor and supports asset valuation. It is the dominant convention in the UK commercial leasing market, though it has been the subject of sustained criticism from tenant groups and has faced regulatory scrutiny in several markets.

An upward and downward rent review clause means the reviewed rent follows the market in both directions. A tenant whose market rent review produces evidence of a softer market can negotiate a rent reduction at review. This structure is more common in markets outside the UK, in some long-term industrial leases, and in negotiations where a tenant has significant bargaining power. From a landlord and lender perspective, an upward and downward clause introduces income uncertainty that upward-only structures specifically eliminate.

The distinction should always be confirmed when reviewing a lease, as it is not always obvious from a headline description of the review type. A market rent review clause can be either upward-only or upward and downward, and the difference in financial outcome over the lease term can be substantial.

Rent Review Disputes and How They Are Resolved

When the landlord and tenant cannot agree on the reviewed rent, most commercial leases specify a dispute resolution mechanism.

The most common mechanisms are:

1. Independent expert determination- An independent valuer is appointed, either by agreement or by a specified nominating body, to determine the market rent. The expert acts on their own opinion of the market rather than as an arbitrator between the parties' positions. Their determination is typically binding and not subject to appeal except on grounds of fraud or manifest error.

2. Arbitration- An arbitrator is appointed who hears submissions from both parties and determines the rent based on the evidence presented. Arbitration is more formal than expert determination and follows procedural rules, with the outcome typically binding and subject to limited rights of appeal.

3. Agreed valuer- Some leases specify that the parties will each appoint a valuer and that the valuers will attempt to agree, or that a third valuer will be appointed if the two appointed valuers cannot reach agreement.

The costs of dispute resolution, including valuer fees and legal costs, can be significant relative to the rent adjustment in dispute, which is why most market rent reviews are resolved by negotiation rather than through formal procedures. The important point is that the review mechanism in the lease governs the process, and that process must be followed precisely to avoid procedural defects that could undermine the outcome.

What Rent Review Type Means for Asset Management

The rent review structure in a commercial lease is not just an administrative detail. It directly affects asset value, income predictability, and the risk profile of the tenancy for the entire lease term.

A portfolio with a high proportion of CPI-linked or fixed-increase leases will produce more predictable income growth but may underperform in a rising market. A portfolio with market rent reviews will be more exposed to both market upside and market risk. A retail portfolio with turnover rent exposure will require ongoing monitoring of tenant trading performance and regular reconciliation of turnover data.

These distinctions matter when reporting portfolio income, modelling future cash flows, or preparing an asset for sale or refinancing. Understanding the review type embedded in each lease is as fundamental as knowing the expiry date. Both feed into the WALE calculation and the income risk profile that drives valuation.

For a full explanation of how lease income duration is measured and reported, see the RIOO guide on What Is Weighted Average Lease Expiry and Why Do Asset Managers Track It.

Frequently Asked Questions

1. What is a rent review in a commercial lease?

A rent review is a lease clause that allows the rent to be adjusted at defined intervals during the lease term. The adjustment is calculated using a method specified in the lease, which can be based on market conditions, a price index, a fixed percentage, or the tenant's turnover.

2. What are the main types of rent review?

The four main types are market rent review, CPI-linked (index-based) review, fixed percentage increase, and turnover rent review. Each uses a different method to calculate the new rent and carries different implications for income predictability and market exposure.

3. What is a ratchet clause in a rent review?

A ratchet clause is a provision in a market rent review clause that prevents the reviewed rent from falling below the current passing rent, even if market evidence supports a lower figure. It is also called an upward-only review provision and is widely used in UK commercial leasing.

4. How often do rent reviews happen in commercial leases?

Review frequency is specified in the lease. Fixed and CPI-linked reviews typically occur annually or every two years. Market rent reviews are more commonly set at 3 to 5 year intervals. Some leases combine both, using fixed increases annually and a market reset at longer intervals.

5. What happens if the landlord and tenant cannot agree on the reviewed rent?

Most leases specify a dispute resolution mechanism, either independent expert determination or arbitration. The appointed expert or arbitrator determines the rent, and that determination is usually binding. Formal dispute resolution is costly, so most reviews are resolved by negotiation between the parties before reaching that stage.

6. Can a rent review result in a lower rent?

It depends on the lease terms. In an upward-only review, the rent cannot fall below the passing rent regardless of market conditions. In an upward and downward review, the rent follows the market in both directions. The lease clause governs which applies.

7. Is a CPI rent review better than a market rent review?

Neither is inherently better. CPI reviews offer predictability and avoid valuation disputes but may diverge from market over time. Market reviews align rent with actual market conditions but introduce uncertainty and require expert input when parties cannot agree. The right structure depends on the risk appetite of both parties and the market context at the time of negotiation.

Summary

A rent review is the mechanism in a commercial lease that determines how and when rent adjusts over the lease term. The four main types — market, CPI-linked, fixed percentage, and turnover — each produce different outcomes for income predictability, market exposure, and administrative complexity.

Understanding which type of review applies to each tenancy in a portfolio, when the next review is due, and whether the clause is upward-only or upward and downward is foundational to commercial lease management. That information drives income modelling, asset valuation, and the renewal conversations that protect portfolio performance over time. Like lease expiry data, rent review data is only useful if it is current, accurate, and held in a system that surfaces it at the right moment.

Want to see how rent review dates, lease terms, and income schedules are tracked across a commercial portfolio in one place? Explore RIOO's contracts and renewals and leasing management features.