UNDERSTANDING LEASE RENT REVIEW
When it comes to leasing premises, understanding the terms of the Lease is crucial.
A Lease is a legal contract between the Landlord and Tenant that outlines the terms and conditions of the Lease. One of the critical components of a Lease is the rent review clause.
WHAT IS RENT REVIEW?
Rent review is the process of adjusting the rent amount during the term of the Lease. The rent review clause is typically included in the Lease and outlines how and when the rent will be reviewed. The purpose of rent review is to ensure that the rent amount is fair and reflects the current market conditions.
TYPES OF RENT REVIEW
There are several types of rent review, including:
FIXED RENT REVIEW
A fixed rent review is a predetermined rent increase that occurs at a specific time during the Lease term. For example, the Lease may state that the rent will increase by 3% every year on the anniversary of the Lease commencement date.
INDEXED RENT REVIEW
An indexed rent review is where the rent is adjusted based on the Consumer Price Index (CPI). The rent increase is calculated based on the percentage increase in the index.
MARKET RENT REVIEW
A market rent review is where the rent is adjusted to reflect the current market conditions. This could be done by the agreement between the Landlord and the Tenant. In the event of disagreement, the rent review is typically conducted by a professional valuer who assesses the rental value of the property and compares it to similar properties in the area.
IMPORTANCE OF RENT REVIEW
Rent review is essential for both Landlords and Tenants. For Landlords, it ensures that they receive a fair return on their investment and that the rent amount keeps up with inflation and market conditions. For Tenants, it ensures that they are not paying more than the market value for the property.
CONCLUSION
Rent review is a critical component of a Lease. As a Tenant, it is essential to understand the rent review clause in your Lease to ensure that you are not paying more than the market value for the property. As a Landlord, it is essential to have a fair and transparent rent review process to ensure that you receive a fair return on your investment.
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