Rent review clauses enable landlords to increase the rent in line with market rates and/or inflation. Typically, a longer lease will involve one or more rent reviews during the term. As a tenant, you will be at risk of the rent increasing. Conversely, as a landlord, you will want to ensure that you are not undercharging later on in the term.
If the rent has not already been set for the entire term of the lease, there are commonly two types pf rent review clauses to consider.
Open Market Rent Review
The landlord will look at the rental values of similar properties in the area. There will be various factors that the landlord will take into account when deciding on the rent:
• The overall condition of the property and any fixtures, fittings or contents and their age against their life expectancy
• Improvements – planned or recent
Most open market rent reviews are on an upward-only basis. This means that the rent will not go down. Where the market rent falls, the rent is likely to stay the same, rather than increase.
Retail Price Index Rent Review
This review will give more certainty with the rent increase. It is calculated in accordance with an index such as the RPI or CPIH, which in effect keeps rent in line with inflation.
Further Reading
Do landlords normally increase rents annually? {Jungle Property Knowledgebase}
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