Almost every commercial lease in the UK — whether for offices, retail, or industrial premises — will contain a rent review clause. The vast majority are open market rent reviews, in which the rent is reset to the current market value at intervals (typically 5 years). Getting the review procedure right, serving trigger notices in time, and marshalling the best comparable evidence are all critical to achieving the best possible outcome. At the same time, the default legal rule that rent review timetables are not 'time of the essence' provides important flexibility — a landlord who misses a trigger notice date is not automatically barred from implementing the review later. This guide explains the procedure, the assumptions and disregards that shape the valuation, and the resolution mechanisms when the parties cannot agree.
Rent Review Procedure — Trigger Notices and Timing
Open market rent review procedure typically requires the landlord to serve a trigger notice on the tenant at or shortly before the review date, proposing a new rent. The tenant then has a period (typically 1–3 months) to serve a counter-notice disputing the proposed figure. After the counter-notice period, the parties negotiate — and if they cannot agree, either party can refer the dispute to an independent third party (RICS arbitration or expert determination). Time of the essence: under the leading authority of United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, a rent review timetable is presumed not to be time of the essence unless the lease expressly provides otherwise, or the structure of the lease (for example, a break clause tied to the rent review) clearly implies it. This means that a landlord who misses the trigger notice date is not normally barred from implementing the review later — but cannot backdate the new rent to the review date if the review is initiated late. The revised rent typically runs from the date of agreement or determination, not from the original review date.
- Trigger notice: served by the landlord at or before the review date; specifies the proposed new rent; starts the formal review process
- Counter-notice: the tenant must serve a counter-notice within the period specified in the lease to dispute the proposed rent — failure to counter-notice on time may, depending on the lease drafting, be treated as acceptance of the landlord's proposed rent
- Time of the essence: generally not time of the essence (United Scientific Holdings [1978]) — missing a trigger notice date does not bar the review but means the new rent does not backdate
- Upward-only: in the overwhelming majority of UK commercial leases, open market reviews are upward-only — the rent can never fall below the passing rent on review, even if the open market rent has fallen
- Scotland: similar principles apply; s.9 Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 provides that a rent review timetable is presumed not to be time of the essence unless expressly stated
Assumptions and Disregards in Open Market Reviews
The open market rent is assessed on the basis of a set of statutory or contractual assumptions and disregards. These are typically set out in the lease rent review clause and shape the hypothetical transaction on which the valuer bases the reviewed rent. Common assumptions: (i) the premises are available to let in the open market with vacant possession; (ii) the tenant's covenants have been fully and properly performed; (iii) no damage or destruction has occurred; (iv) the premises are fit and ready for immediate use by the hypothetical tenant for the permitted use; (v) a new lease is granted on the same terms and conditions as the actual lease, including the same rent review clause (this prevents the review from disregarding the future rent review cycle). Common disregards: (i) the tenant's actual occupation — the tenant is not penalised for being in occupation (a new tenant would command a better deal); (ii) the tenant's goodwill attributable to its business; (iii) any improvements carried out by the tenant with the landlord's consent at the tenant's own expense and during the current or any previous tenancy (so the tenant does not pay higher rent for improvements it has funded). The interaction between the assumptions and the actual lease terms — particularly the permitted use and any alienation restrictions — is often the most contentious element of a rent review negotiation.
- Willing landlord and willing tenant: the hypothetical transaction is between a willing landlord and a willing tenant at arm's length — neither is desperate to deal
- Vacant possession: the premises are assumed available with vacant possession — even though the actual tenant is in occupation; prevents the review from reflecting the sitting tenant's covenant strength
- Same terms including review: the new lease on which the review is based includes the same rent review provisions as the actual lease — this ensures the future review cycle is not disregarded from the valuation
- Tenant's improvements disregarded: improvements made by the tenant with landlord's consent at the tenant's cost are disregarded — without this, the tenant would pay higher rent for value it has itself created
- Tenant's goodwill disregarded: the value of the tenant's business and customer base is excluded — the reviewed rent reflects the premises, not the tenant's trading success
Comparable Evidence and RICS Standards
The reviewed rent must be supported by comparable rental evidence — actual lettings in the market demonstrating what similar premises have been let for at or around the review date. RICS Valuation — Global Standards (the Red Book) requires surveyors advising on rent reviews to use the best available comparable evidence. Types of comparable: (i) lease comparables — actual new lettings in the market, adjusting for size, specification, location, lease terms, and incentives (rent-free periods, fit-out contributions); (ii) rent review settlements in similar properties; (iii) arbitration awards and expert determinations. Incentives adjustment: in markets where rent-free periods or capital contributions are common, comparables must be adjusted to express the rent on a net-effective basis (the economic rent after deducting the value of incentives over the lease term) or a headline basis — consistency is critical. Zone analysis: for retail properties, ground floor areas are typically analysed using a 'zones' method (ITZA — in terms of zone A) to allow comparison between different-shaped units.
- RICS Red Book: surveyors are required to use the best available comparable evidence and comply with RICS Valuation Global Standards in all rent review work
- Lease comparables: actual new lettings — the best evidence; must be adjusted for differences in size, specification, location, lease terms, and incentive packages
- Rent-free period adjustment: rent-free periods must be reflected in the comparable to produce a net effective rent — a lease at £100,000 pa with 12 months rent-free on a 10-year term has an effective rent lower than the headline figure
- Arbitration awards: rent review arbitration awards are admissible comparable evidence; expert determination awards are also used; both carry significant evidential weight
- Zone analysis (retail): retail ground floor space is typically valued using ITZA zone analysis; surveyors must adjust comparables to the same zoning basis for a consistent comparison
RICS Arbitration vs Expert Determination
Where the parties cannot agree the reviewed rent, the dispute is referred to an independent third party. Two main methods are used in UK commercial leases: RICS arbitration and expert determination. RICS arbitration: the RICS President appoints an arbitrator (usually a RICS-qualified surveyor or occasionally a barrister). The arbitration is governed by the Arbitration Act 1996 — the arbitrator issues directions, receives submissions and evidence from both parties, and makes a binding award. Awards can be appealed on a point of law to the courts in limited circumstances. Expert determination: the parties jointly appoint an independent expert (or the RICS President appoints if they cannot agree). The expert acts on their own knowledge and judgment — they are not bound to follow the submissions of the parties (although they may invite them). The determination is binding and can only be challenged on grounds of fraud or manifest error. Each method has advantages: arbitration is more formal and more suitable for large or complex reviews; expert determination is faster, cheaper, and more suitable where the parties want a quick resolution without a formal hearing.
- RICS arbitration: formal process governed by Arbitration Act 1996; arbitrator appointed by RICS President; parties submit evidence and representations; award binding; limited appeal on law
- Expert determination: independent expert acts on their own judgment; not governed by Arbitration Act 1996; binding with no appeal except fraud or manifest error; typically faster and cheaper than arbitration
- Choice of method: the lease will usually specify which method applies; if the lease provides for one but not both, the lease method governs; some leases give one party the right to elect
- RICS President's appointment: if the parties cannot agree the choice of arbitrator or expert, either party can apply to the RICS President (or their nominee) to make the appointment
- Costs: in arbitration, the arbitrator allocates costs; in expert determination, the expert's fee is typically shared equally unless the lease or expert's terms provide otherwise
Frequently asked questions
What is an open market rent review in a commercial lease?+
An open market rent review resets the rent in a commercial lease to the prevailing open market rental value at the review date, assessed by reference to what a willing landlord and willing tenant would agree for the premises in the open market. The review is carried out on the basis of assumptions and disregards set out in the lease and must be supported by comparable rental evidence.
Is time of the essence in a commercial rent review?+
Generally no. Under the leading House of Lords authority of United Scientific Holdings Ltd v Burnley Borough Council [1978], rent review timetables are presumed not to be time of the essence unless the lease expressly provides otherwise or the structure of the lease (such as a break clause linked to the rent review) clearly implies it. A landlord who misses a trigger notice date is not automatically barred from implementing the review later.
What are the standard disregards in an open market rent review?+
The standard disregards are: (i) the tenant's own occupation of the premises; (ii) the tenant's goodwill attributable to their business; and (iii) any improvements made by the tenant with the landlord's consent at the tenant's own cost. These disregards ensure the tenant does not pay higher rent because of their own occupation or the improvements they have funded.
What is the difference between RICS arbitration and expert determination in a rent review?+
RICS arbitration is a formal process governed by the Arbitration Act 1996 — the arbitrator receives submissions and evidence from both parties and makes a binding award. Expert determination is an informal process in which the expert uses their own judgment; the determination is binding and can only be challenged for fraud or manifest error. Expert determination is typically faster and cheaper; arbitration is more suitable for large or complex disputes.
What does upward-only mean in a commercial rent review?+
An upward-only rent review clause means that on review, the rent can only stay the same or increase — it cannot fall below the passing rent even if the open market rent has declined since the last review. The vast majority of commercial leases in the UK contain upward-only review clauses, meaning a tenant locked into a lease above market rent at review will simply continue to pay the passing rent.