REAL ESTATE DISPUTE RESOLUTION

Is the end in sight for upward-only rent reviews?

It is common practice for upward-only rent reviews to be agreed between parties in commercial leases. Essentially this means that when the rent is reviewed in accordance with the terms of the lease, even if the new reviewed rent is lower than the current rent, the rent will stay the same.

Clearly this is a huge disadvantage for tenants, who end up paying higher than market rent until the next review date or the end of the lease. However, such clauses are beneficial to landlords, especially investment landlords who get the certainty that the rent will remain at a minimum level for the contractual term of the lease, and therefore security of income.

Rent in the real world
Given the current challenging market, many tenants will already be pushing for either-way rent reviews (where the rent could go up, go down, or stay the same at review), turnover (linked to trading success) or stepped rents (fixed increases at defined periods) for their new leases so that at the very least the rent payable reflects the true market value of the premises or linked to the tenant’s trading success. However, for those tenants already stuck in leases which include upward only rent reviews there could be some relief on the way.

A Private Member’s Bill, introduced into Parliament by Sarah Olney MP, is currently making its way through the House of Commons. The Bill seeks not only to prohibit the use of upward-only rent review clauses in future commercial agreements, but to nullify existing upward-only clauses.

Presented in June 2021, its second reading will not take place before March 2022; if successful, it will clearly be of benefit to those tenants constrained by such clauses.

Ireland banned the use of upward-only rent review clauses in 2010; very many tenants will be hoping to see England and Wales finally follow their lead.

About the authors


about the author img

Cheraine Williams

Senior Associate

Expert in property and construction disputes, in addition to property related insolvency issues and agricultural tenancies.

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