This article is reviewed and approved by Peter O’Connor & Son LLP.
A commercial rent review decides how much rent you pay for the rest of your lease. Get it wrong and a business can end up paying well over the going rate for years. It is one of the most important clauses in any commercial lease, yet it is often the least understood.
At Peter O’Connor & Son Solicitors, we act for both business tenants and landlords on commercial leases and rent reviews across Ireland. This guide explains how rent reviews work, what the law allows and where the common pitfalls lie.
What is a commercial rent review?
A rent review is a point in the lease when the rent can be adjusted, usually to reflect changes in the property market. Most commercial leases in Ireland set a review every five years, though shorter or longer periods appear too. The review does not reopen the whole lease. It only revisits the rent, using the method set out in the rent review clause.
The review is normally started by the landlord, who serves a rent review notice on the tenant. From there the two sides, often with the help of chartered surveyors, try to agree the new figure. If they cannot agree, the lease sets out how the dispute is settled.
The ban on upward-only rent reviews
For years, Irish commercial leases were dominated by upward-only rent review clauses. These allowed the rent to rise at each review but never to fall, even when market rents had dropped. A tenant who signed up in good times could be locked into a high rent right through a downturn.
That changed with section 132 of the Land and Conveyancing Law Reform Act 2009, which came into force on 28 February 2010. For any commercial lease created on or after that date, a rent review must allow the rent to move up or down in line with the market. Upward-only clauses in these newer leases cannot be enforced.
The ban is not retrospective. Leases signed before 28 February 2010 can still contain valid upward-only clauses, so many older commercial tenancies remain bound by them. This has created two classes of lease in Ireland. The date a lease was signed matters a great deal, and it is one of the first things we check.
Common types of rent review clause
Since the ban, landlords and tenants have used a range of review methods. The main types you will come across are:
- Open market review: the rent is reset to the current market rent for a similar property in a similar location. This is the most common method.
- Index-linked review: the rent moves in line with an agreed index, most often the Consumer Price Index. This gives both sides more certainty.
- Fixed or stepped increases: the lease sets the future rent in advance, rising by agreed amounts on set dates.
- Cap and collar: an open market review with a floor and a ceiling, so the rent cannot rise above or fall below agreed limits.
Each approach shares risk differently between landlord and tenant. The right one depends on the property, the sector and how much certainty each side wants.
How the rent review process works
An open market review usually follows a set path. The landlord serves the rent review notice. Each side then gathers evidence of what comparable properties are letting for, known as comparables, and surveyors negotiate on that basis.
Two points often catch tenants out. First, improvements the tenant has paid for are usually disregarded, so you are not charged extra rent on your own investment. Second, the valuation assumes certain lease terms, so an unusual clause can push the figure up or down. When a figure is agreed, it is recorded in a short document called a rent review memorandum, which is kept with the lease.
What happens if you cannot agree
If the two sides cannot reach a figure, the lease will usually provide for the dispute to go to a third party. This is normally either an independent expert or an arbitrator, appointed by agreement or, failing that, by a body such as the Society of Chartered Surveyors Ireland.
An independent expert reaches their own view on the correct rent. An arbitrator decides between the cases the two sides put forward. Either way the decision is binding, so the evidence and the way it is presented can have a real effect on the outcome. This is the stage where sound professional advice tends to pay for itself.
How to protect your position
Whether you are taking a new lease or facing a review under an existing one, a few steps make a real difference. Read the rent review clause before you sign, not after. Note the review dates well in advance. Take advice from a solicitor and a chartered surveyor early, rather than once a notice has already landed.
We would also caution against ignoring a rent review notice. Some leases contain strict time limits and missing one can weaken your position or even fix the rent against you.
Get the detail right
A commercial rent review can shape your costs for years, so it deserves proper attention rather than a quick signature. The law has moved in tenants’ favour since 2010, but the detail of your own lease is what really decides the outcome.
If you need advice on a commercial lease or an upcoming rent review, contact Peter O’Connor & Son today. Our property team acts for tenants and landlords throughout Ireland and would be glad to help.