Types of Rent Review Mechanism
Open market review: the most common mechanism — rent reviewed to the open market rental value on the review date (willing landlord, willing tenant, hypothetical new letting on the same lease terms). Upward-only review: the rent can only increase or stay the same on review; cannot fall even if market rents decline; standard in UK institutional commercial leases and legal in England and Wales (prohibited for new Scottish commercial leases since 2009 under the Land Reform (Scotland) Act 2003). RPI/CPI-linked: automatic formulaic review; avoids valuation disputes; return tied to the index — may lag market rents. Turnover rent: base rent plus % of turnover above a threshold; aligns landlord income with tenant performance; common in retail and hospitality. Collar and cap: upward-only review with a minimum increase (collar) and maximum increase (cap); reduces volatility for both parties.
Open Market Review — Assumptions, Disregards, and Traps
Assumptions: premises vacant and available to let; lease on the same terms (less the rent review clause itself); willing landlord and willing tenant; premises fit for the permitted use. Disregards (LTA 1954 s.34 basis): any goodwill of the sitting tenant; improvements carried out by the tenant during the term at their own expense and not pursuant to an obligation to the landlord; fact of the sitting tenant's occupation. Time-of-the-essence traps: where the review clause makes the trigger notice deadline TotE, a late notice can forfeit the review for that period — the rent stays at the pre-review level until the next review date. Where TotE is not expressed, a late notice activates the review but the reviewed rent runs only from the date of the late notice — Drebbond Ltd v Horsham DC (1978). Counter-notice default: failure by the tenant to serve a counter-notice within the specified period can result in the landlord's proposed rent being accepted by default.
Dispute Resolution — Expert Determination vs Arbitration
Expert determination: the expert (RICS-qualified surveyor) acts on their own expertise; not bound to decide solely on submitted evidence; decision binding except for manifest error or fraud; most common for commercial rent reviews. Arbitration: governed by Arbitration Act 1996; decided on the evidence submitted by the parties; challengeable on limited grounds (serious irregularity; error of law); arbitrator's costs discretion. Calderbank offers: in arbitration, either party can make a costs-protecting offer — if the award beats the offer, the offeree may pay costs from the offer date. RICS appointment: either party can apply to RICS to appoint an expert or arbitrator if the parties cannot agree. Diarise all review trigger notice deadlines with a 3-month lead time; instruct specialist commercial property surveyors for review negotiations.