Rent reviews in commercial leases: how they work, how to prepare

The main types of review

A lease of more than a few years will contain a mechanism for changing the rent part way through, typically every three or five years. There are three main types and they behave very differently.

An open market review resets the rent to what the premises would let for on the review date, assessed against a hypothetical letting on terms the lease sets out. It requires evidence of comparable lettings and a valuation exercise, and it is the type that generates most of the argument.

An index-linked review moves the rent in line with a published index, usually the Retail Prices Index or the Consumer Prices Index, by a formula. It needs no valuation and no evidence, only arithmetic, so it is cheap to operate and predictable, and it has no connection to what the premises are actually worth.

A fixed increase or stepped rent is set in the lease at the outset, so there is nothing to review. Turnover rents, where the rent is a share of the tenant's takings, are a fourth type found mainly in retail.

The type of review, the frequency and the basis are matters for negotiation when the lease is agreed, and the RICS Code for leasing business premises requires a landlord to tell the tenant the proposed frequency and method at the heads of terms stage. A tenant who did not raise it then has to live with what the lease says.

Upwards-only reviews and the ban

Most reviews in existing commercial leases are upwards-only. The clause provides that the rent after review is the higher of the rent then payable and the figure the review produces, so the rent can rise or stay the same and can never fall, whatever has happened to the market. A tenant of premises whose rental value has dropped by a fifth keeps paying the old rent for the rest of the term.

That is changing. Legislation that received Royal Assent on 29 April 2026 inserts a new section 54A and Schedules 7A and 7B into the Landlord and Tenant Act 1954, which will make an upwards-only review term of no effect in a business tenancy to the extent that it would produce a rent higher than the figure the review mechanism itself produces. It covers open market, index-linked and turnover reviews, and it applies whether or not the lease has security of tenure. The ban takes effect on a date to be set by regulations, and by 22 September 2026 none had been made.

The ban will apply to tenancies granted after it comes into force, and generally to arrangements made before then only where a renewal arrangement with an existing tenant was entered into on or after 17 March 2026. A lease granted before the commencement date under earlier heads of terms keeps its upwards-only clause. Our guide to commercial leases explains the provisions in more detail, and until they are in force an upwards-only clause in a new lease remains valid and remains a point to negotiate.

Index-linked reviews

An index-linked review multiplies the rent by the change in the chosen index between two dates. The detail decides the outcome. The Retail Prices Index has historically run above the Consumer Prices Index, so a lease linked to RPI produces higher rent over time than one linked to CPI. The UK Statistics Authority has stated that from February 2030 RPI will be calculated using the methods and data of CPIH, the version of CPI that includes owner-occupiers' housing costs, which is expected to bring the two closer; a lease running past that date should say what happens if the index is changed or discontinued.

A cap limits the increase at each review, a collar guarantees a minimum, and the two together produce a band within which the rent moves. A collar of 2% a year on a lease where inflation runs at 1% is an increase the tenant did not bargain for. The RICS Code says index-linked provisions should not contain obscure formulae designed to produce a greater increase than the index itself, and a tenant should have the formula checked with worked examples before signing.

Some formulae compound annually between reviews, some apply the whole change at the review date, and some apply the cap and collar to the whole period between reviews instead of to each year. Each produces a different number from the same index figures.

The hypothetical lease

An open market review does not ask what the tenant would pay to stay. It asks what a willing tenant would pay a willing landlord for a hypothetical lease of the premises, with vacant possession, on the review date. The terms of that hypothetical lease are set out in the review clause, and they can differ from the actual lease in ways that move the rent.

The length of the hypothetical term matters: a ten-year term may be worth more or less per year than the unexpired residue of the actual lease. Whether the hypothetical lease contains the same break clause, the same user restriction, the same rent review pattern and the same repairing obligations all feed into what the hypothetical tenant would pay. A clause that assumes a lease with a wider permitted use than the actual lease inflates the rent, and one that assumes the actual user clause, which may be narrow, deflates it.

The definition of market rent should not produce a headline rent, which is the rent that ignores the rent-free periods and other inducements a tenant would obtain in the real market. The RICS Code says headline rent definitions should be used only where expressly agreed, and a tenant should read the definition for any wording that disregards inducements.

Assumptions and disregards

The review clause lists what the valuer must assume and what must be ignored, and these are the terms most worth reading.

The usual assumptions are that the premises are available to let with vacant possession, that they are fit for immediate occupation and use, that the tenant has complied with its covenants, and that the premises have not been damaged. The assumption of compliance stops a tenant arguing that its own failure to repair has reduced the rent. The assumption of fitness can be dangerous where the premises were let as a shell and the tenant fitted them out, because it may mean the tenant pays rent on its own works unless the disregards deal with them.

The usual disregards are the tenant's occupation, any goodwill the tenant's business has attached to the premises, and improvements the tenant has carried out at its own cost with consent. The improvements disregard is the one to check. If it is limited to improvements made during the current lease, works done under an earlier lease or before the lease was granted are rented back to the tenant. If it requires the landlord's written consent and consent was never formally given, the same happens.

Where the actual lease has a rent-free period or the tenant paid a premium, the clause should say whether those are to be taken into account, and it is usually the landlord's draft that decides they are not.

The trigger notice and time of the essence

Most review clauses start with a notice from the landlord proposing a new rent, sometimes within a window before the review date. The tenant may have a period in which to serve a counter-notice, and some clauses provide that a tenant who does not respond in time is deemed to have accepted the landlord's figure.

The general rule comes from the House of Lords in United Scientific Holdings Ltd v Burnley Borough Council, decided in 1977 and reported at [1978] AC 904. Time is presumed not to be of the essence of the steps in a rent review timetable, so a landlord who serves the trigger notice late has usually not lost the review, and a tenant who misses a counter-notice deadline has usually not lost the right to dispute the figure. The presumption gives way where the lease says time is of the essence, or where the structure of the lease points that way, for instance where the tenant's break date is tied to the review so that the tenant needs the new rent before deciding whether to leave.

A deemed acceptance clause is the exception in practice. Where the lease says the landlord's figure becomes the rent unless the tenant objects within a stated period, the courts have generally treated that period as one where time is of the essence, because the clause has no purpose otherwise. A tenant should therefore treat every deadline in the review clause as strict and respond within it, whatever the general rule. The RICS Code says leases should allow either party to start the review and should not set time limits intended to fix a rent through inaction, and a tenant negotiating a new lease should hold the landlord to that.

Arbitrator or independent expert

Where the parties cannot agree the rent, the lease provides for a third party to decide, and it will say whether that person acts as an arbitrator or as an independent expert. Both are usually chartered surveyors appointed by agreement or, failing that, by the President of the Royal Institution of Chartered Surveyors.

An arbitrator acts under the Arbitration Act 1996. Section 1 states that the object is the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense, and section 33 requires the arbitrator to act fairly and impartially, giving each side a reasonable opportunity to put its case and to deal with the other side's. The arbitrator decides on the evidence and submissions the parties put forward, can order disclosure and hold a hearing, and the award can be challenged in court only on the limited grounds the Act allows. The process is formal and the costs, which the arbitrator can award between the parties, reflect that.

An independent expert is appointed to reach their own view of the rent. The expert can use their own knowledge and investigations, need not confine themselves to what the parties submit, and their determination is final unless the lease says otherwise or the expert has departed from their instructions. The expert is answerable in negligence if they get it wrong. Expert determination is faster and cheaper and suits straightforward premises in an active market; arbitration suits a dispute where the evidence is contested and the sums are large.

Which applies is decided by the lease, and it is worth knowing before the review date, because it shapes how the tenant's own surveyor prepares.

Back rent and interest

A review is rarely settled by the review date. The lease will say that the tenant continues to pay the old rent until the new one is agreed or determined, and then pays the difference, backdated to the review date, in one sum. Most leases add interest on that sum from the review date, or from each rent day, at a rate set in the lease.

The interest rate is a term of the lease. Some leases set it at the base rate, some at base plus a margin, and some at the default interest rate used for late payment, which can be several points higher. A tenant should reserve for the difference from the review date onwards, and should check what rate the lease applies, because a long-running review at a high rate adds materially to the bill.

How a tenant prepares

A rent review is a negotiation the tenant is allowed to have. The landlord's trigger notice proposes a figure and is an opening position, and a tenant who pays it without question because it arrived on headed paper pays too much.

Start a year before the review date. Read the review clause and note the type of review, the hypothetical lease terms, the assumptions and disregards, every date and whether time is stated to be of the essence, the dispute mechanism and the interest provision. Gather the evidence: what comparable premises have let for recently, what inducements those tenants received, what the tenant's own improvements were and whether consent was documented. Instruct a surveyor who acts for tenants on reviews in that market, and agree with them a figure that the evidence supports.

Respond to the trigger notice in time and with a counter-proposal, and keep every deadline whether or not time is expressed to be of the essence. Negotiate through the surveyors, and be prepared to go to the third party where the gap is large enough to justify the cost. Where the lease is upwards-only and the market has fallen, the realistic objective is no increase, and evidence that the market rent is below the passing rent achieves it.

Under a new lease, the same work happens at the heads of terms. Choose the index, the caps and collars, the review pattern and the dispute mechanism with the numbers in front of you, and check the assumptions and disregards against what the tenant is actually going to do to the premises.

Frequently asked questions

What is an open market rent review?

It resets the rent to what a willing tenant would pay a willing landlord for a hypothetical lease of the premises on the review date, on the terms, assumptions and disregards the lease sets out. The valuer looks at comparable lettings, ignores the tenant's occupation, goodwill and consented improvements, and assumes the premises are vacant and fit for use. The hypothetical terms can differ from the real lease, and those differences move the figure.

Can rent go down at a rent review?

Under an upwards-only clause, no: the rent after review is the higher of the current rent and the review figure. Legislation that received Royal Assent on 29 April 2026 will make such clauses of no effect in business tenancies granted after it is brought into force by regulations, and by 22 September 2026 no regulations had been made. Under a lease without an upwards-only clause, or an index-linked review with no collar in a period of falling prices, the rent can fall.

What happens if the landlord misses the rent review date?

Usually nothing is lost. Since United Scientific Holdings v Burnley Borough Council, time is presumed not to be of the essence of a rent review timetable, so a late trigger notice is still effective unless the lease states that time is of the essence or its structure implies it, for example where a tenant's break is tied to the review. A tenant should still treat every date as strict, because a deemed acceptance clause is generally enforced as written.

What is the difference between an arbitrator and an independent expert?

An arbitrator acts under the Arbitration Act 1996, decides on the evidence and arguments the parties put forward, must act fairly and impartially under section 33, and produces an award that can be challenged in court only on limited grounds. An independent expert reaches their own view using their own knowledge and enquiries, and their decision is final unless they depart from their instructions, though they can be sued in negligence. The lease says which applies.

Is the new rent backdated?

Yes, almost always. The tenant pays the old rent until the new one is agreed or determined, then pays the difference back to the review date in one sum, usually with interest at the rate the lease specifies from the review date or each rent day. A tenant should reserve for the likely difference from the review date and check the interest rate, because a slow review at a default rate several points above base adds materially to the amount due.

How should a tenant prepare for a rent review?

Read the review clause a year ahead and note the basis of review, the hypothetical lease terms, the assumptions and disregards, the dates, the dispute mechanism and the interest provision. Gather comparable evidence and the record of your own improvements and the consent for them. Instruct a surveyor who acts for tenants in that market and agree a supportable figure. Respond to the landlord's notice in time with a counter-proposal, and negotiate the figure. The opening figure is an opening position.

What are RPI and CPI reviews?

Index-linked reviews move the rent by the change in the Retail Prices Index or the Consumer Prices Index between two dates, usually with a cap on the increase and a collar guaranteeing a minimum. RPI has historically run higher than CPI, and the UK Statistics Authority has said that from February 2030 RPI will adopt the methods and data of CPIH. The formula, the compounding and the cap and collar decide the outcome, so ask for worked examples before agreeing one.

Sources & further reading

• English Devolution and Community Empowerment Act 2026, Schedule 37
• Arbitration Act 1996, section 1
• Arbitration Act 1996, section 33
• UK Statistics Authority: response to the consultation on reforming the methodology of the RPI
• RICS Code for leasing business premises, 1st edition
• Landlord and Tenant Act 1954, Part II

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 22 September 2026. AD Solicitors Limited is a recognised body regulated by the SRA (no. 8011228).