Can I Increase the Rent During the Lease Term? Understanding Rent Review Clauses in UK Commercial Leases
Landlords frequently ask whether they can increase the rent during a lease term. The answer lies in the lease agreement itself and the specific rent review mechanisms it contains.
In the world of commercial property leasing, rent reviews are a standard feature of long-term contracts, particularly those that span five years or more.
Whether through fixed increases, inflation-linked mechanisms such as RPI or CPI, or upward-only rent reviews, landlords must understand when and how these provisions are legally enforceable.
This article examines the legal frameworks, practical considerations, and common structures employed to increase rent during a lease term, including upward-only clauses and index-linked rent escalation, enabling landlords to make informed, lawful decisions.
Rent Increases Must Be Agreed to in the Lease
To increase rent during the lease term, landlords must rely on the terms of the lease agreement. English and Welsh contract law treat a commercial lease as a binding agreement.
If there is no rent review clause or mechanism allowing for an increase, the rent cannot be lawfully increased until the lease expires or is renegotiated.
In effect, a landlord cannot unilaterally impose a rent increase unless the lease provides a legal framework that allows for such an increase. Rent increases that exceed the terms agreed upon in the lease may be challenged or disregarded by the tenant.
Common Types of Rent Review Clauses
The commercial leasing market typically uses several standard forms of rent review clauses. These clauses define how and when the rent can be increased during the lease term.
Upward-Only Rent Reviews
This is the most landlord-friendly mechanism.
The lease allows the rent to be reviewed at intervals (commonly every three or five years), but the rent can only increase or remain the same. Even if market rents fall, the reviewed rent cannot be reduced. This offers landlords stable rental income and security of investment value.
Upward-only clauses are commonly used in retail and office leases, particularly in longer-term leases. They are enforceable under UK law as long as both parties agree to the clause at the outset.
Open Market Rent Reviews
An open market rent review allows the rent to be adjusted to the current market rate, as assessed by a surveyor or valuation expert.
Depending on how the clause is drafted, this could mean the rent could increase or remain the same —,ut usually not decrease, due to an upward-only provision embedded in the clause.
The calculation is based on what a willing tenant would pay to a willing landlord for the premises on the open market, disregarding any improvements made by the tenant.
Index-Linked Rent Reviews (RPI or CPI)
These clauses link rent increases to inflation, specifically the Retail Prices Index (RPI) or Consumer Prices Index (CPI). The rent increases annually or at agreed intervals based on the movement of the selected index.
RPI and CPI-linked clauses are increasingly comstandardspecially in industrial and warehouse leases. They offer landlords a hedge against inflation and provide tenants with predictability.
However, some leases impose a cap and collar, limiting how much the rent can rise or fall based on inflation rates.
Stepped or Fixed Rent Increases
Sometimes, leases include fixed increases known in advance. For example, rent might be £25,000 per annum in year one, £27,500 in year three, and £30,000 in year five. These stepped increases provide both parties with clarity on cash flow and budgeting.
How Are Rent Reviews Carried Out?
A rent review process is typically initiated by the landlord, who serves a formal rent review notice to the tenant. This must be done by the terms of the lease, including any deadlines or notice periods.
If the parties cannot agree on the new rent, the lease may provide for third-party determination through an independent surveyor, arbitrator, or expert. The decision of this third party is typically final and binding.
Rent reviews can be time-sensitive. If a landlord misses the window to trigger a review, they may lose the right to increase rent for that review period. Therefore, close attention to lease timelines is critical.
Legal Enforceability of Rent Review Clauses
In the UK, courts will generally uphold rent review clauses that are written, agreed upon, and not contrary to public policy.
The key principle is freedom of contract. If both parties signed the lease with a rent review clause, it is legally binding unless there is evidence of misrepresentation, fraud, or duress.
Disputes over rent reviews often involve disagreements regarding the calculation of market rent or the interpretation of ambiguous language. To avoid this, landlords should:
- Use unambiguous drafting;
- Point experienced commercial property solicitors to draft or review lease clauses;
- Keep records of negotiations and rent review notices.
Can You Increase Rent Without a Rent Review Clause?
No. If the lease does not contain a rent review clause or provision allowing for rent increases, then the rent is fixed for the entire lease term.
You cannot legally increase it until the renewal or renegotiation period has expired. Attempting to raise the rent without a contractual provision would constitute a breach of contract.
If you wish to revise the rent but the lease is silent on the matter of review, you may negotiate with the tenant. However, they are under no legal obligation to accept.
Rent Review in Lease Renewals under the Landlord and Tenant Act 1954
For tenants with protected leases under the Landlord and Tenant Act 1954, rent can be reviewed during lease renewal. The court will set the new rent based on open market valuation, disregarding any improvements the tenant has made and any rent-free periods or inducements.
This applies only at renewal, not during the lease term — unless the lease itself contains a rent review clause.
Special Considerations for Tenants and Landlords
While landlords focus on maintaining the investment value of their property, tenants are often concerned about affordability, predictability, and fairness. Therefore:
- Landlords should strike a balance between the commercial benefits of upward-only reviews and the risk of making their properties less attractive to quality tenants.
- Tenants should seek professional advice before entering leases with complex rent review clauses, especially those tied to inflation metrics or market fluctuations.
- Both parties benefit from well-drafted clauses that reduce the scope for future disputes.
FAQs
Can I increase rent whenever I like if I own the property?
No. Once a lease is signed, you are bound by its terms and conditions. Unless there is a specific rent review clause, you cannot increase the rent until the lease term ends or is renewed.
What is an upward-only rent review?
An upward-only rent review clause ensures that the rent can only increase or remain the same; it never decreases at the time of review. It protects landlords from falling market rents.
What happens if my lease does not include a rent review clause?
You cannot increase the rent during the term of the lease. The rent remains fixed until the lease expires. You may renegotiate rent at lease renewal or if both parties agree to vary the lease.
Can I use RPI or CPI to increase the rent annually?
Yes, if your lease includes a rent review clause that is linked to the RPI or CPI. This automatically adjusts rent based on inflation, typically reviewed annually or at agreed intervals.
Are rent review clauses legally enforceable in the UK?
Yes. Courts enforce drafted rent review clauses as long as both parties agree to them in the lease and they are not unreasonable or misleading.
Can I insert a new rent review clause during the term of the lease?
Only with the tenant’s consent. You would need to formally vary the lease through a deed of variation, which must be signed by both parties to the lease.
What if the tenant refuses to accept the new rent?
If the lease includes a rent review clause and the process is followed correctly, you may refer the matter to arbitration or an independent expert, as outlined in the lease. Their determination is usually binding.
Is a rent review the same as a rent increase?
Not exactly. A rent review is the process that may lead to a rent increase — or, in some cases, no change — depending on the method used (market rent, RPI, CPI, fixed steps, etc.).
How often can the rent be reviewed?
It depends on the lease. Common review intervals are every three or five years in long-term leases or annually for inflation-linked agreements.
What is a ‘’ap and collar ” clause in rent reviews?
This clause sets a maximum (cap) and minimum (collar) on the amount by which the rent can increase or decrease during a review. It provides a level of protection for both parties, especially in volatile markets.
Conclusion
The ability to increase rent during the lease term hinges entirely on what the lease agreement allows.
Landlords must not assume they have an automatic right to raise the rent — it must be contractually provided for, whether through upward-only rent reviews, open-market reassessments, inflation-linked increases, or stepped rises.
Understanding and properly executing rent review clauses is essential not only for maintaining income but also for avoiding legal disputes and ensuring transparency with tenants.
Always seek legal advice when drafting or interpreting rent review mechanisms to ensure they are fair, enforceable, and aligned with your long-term investment goals.
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