Rent review
Virtually all commercial leases issued in the U.K. will contain a provision allowing the landlord to periodically adjust the rent payable by the tenant.
This rent review clause represents a significant safeguard for the landlord as it enables them to adjust the rent to reflect current market conditions. Many leases are granted for considerable periods of time and without a rent review clause, the rent payable could fall significantly behind levels prevailing in the market at any particular point in time. And, of course, inflation erodes value over time.
Even more significant than the existence of the clause itself is the fact that these clauses provide for 'upwards – only' reviews. Should general market rents be lower, the tenant will not benefit as the rent will be unchanged – not reduced.
This is one of many reasons why, for many years, commercial property has been such an attractive prospect for investors. With a financially sound tenant in occupation, there is clear visibility of income for years ahead with no risk of reduction until the lease comes to the end of its term, or is ended by virtue of the exercise of a 'break clause'.
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