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Rental reviews
23 Jan 19

Market Rental Reviews

The Retail Leases Act requires that only one method is nominated at each review date, and not “the greater increase of…”.  In the case of market rental reviews, potentially the rental could go either way – increase or reduce, depending on current market conditions and the Lease cannot include a clause that restricts the rental from reducing under this type of review.

A market rental review usually takes effect at the exercise of an Option Term (lease renewal) and provides the Landlord and Tenant with an opportunity to assess whether the rental is consistent with current levels being obtained for comparable nearby properties and also what would reasonably be expected should the property become empty and be offered for re-lease.

Failing agreement between Landlord and Tenant as to what the new rental will be, the Lease will provide for a dispute resolution by way of referral by either party to an independent specialist valuer – usually through the Small Business Commissioner – and the cost is shared equally between the parties. The valuer is appointed as an expert, not as a mediator and as such, their decision is binding on all parties. We suggest you read and understand the nominated process, both in your lease and in accordance with the Act . However, some abiding regulations apply, and are detailed under Division 3 of the Retail Leases Act which in summary requires:

1. When the review is to take place;

2. The basis or formula for the review;

3. The process by which rental is determined failing agreement between the Landlord and Tenant

As always, if there are any questions, concerns or doubts, please consult your legal representative.

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