Rent Reviews in Commercial Leases
Posted: 3 November 2025
Two of the most important considerations for parties to a commercial lease are, ‘What is the annual rent?’ and ‘How and when can the rental amount be reviewed?’ The answers are always found in the deed of lease for the premises.
Methods of review
The first schedule of The Law Association Deed of Lease (the most common format for commercial leases) sets out the methodology relating to rent reviews, including the review dates and the review types. There are three main methods of rent review:
- Market rent review
- CPI (Consumer Price Index) rent adjustment, and
- Fixed rent adjustment.
Most leases include a combination of two of the three rent review/adjustment methods, with a common pattern being fixed with market rent reviews on renewal dates.
The Law Association’s Deed of Lease standard terms are discussed below. Care, however, should be taken to ensure the clauses have not been modified in your lease.
Market rent review
When conducting a market rent review, either party may give the other party written notice of what the new market rent amount will be from the rent review date.
Notice cannot be given earlier than three months before the relevant rent review date, and it can be given at any time before the next rent review date (regardless of the method of the next rent review). If it is given more than three months after the rent review date, however, the new annual rent amount will only apply from the date of service of the notice rather than the rent review date.
Typically, the rent review process is initiated by the landlord obtaining a market rent valuation to use as the basis for the new rent figure. The other party then has 20 working days to agree, or dispute, the market rent value.
If the new rent value is disputed, the matter will either be decided by an arbitrator or, more commonly, by each party appointing a registered valuer to act as an expert, with the valuers to agree on the market rent value. If the valuers cannot agree on the market rent, a third party appointed jointly by the valuers will decide.
CPI rent adjustments
The second method of rent review is a CPI rent adjustment; this follows a formula set out in the deed of lease. CPI rent adjustments can only increase the rent payable, if the CPI rent adjustment results in a lower amount, the rent will remain the same.
CPI adjustments can be popular with landlords as they are less costly and time consuming to complete when compared with market rent reviews.
A drawback, however, is that in high inflation environments, CPI adjustments can result in significantly larger than anticipated rent increases, and the new rent payable may not be reflective of the general market.
It is open to landlords and tenants to agree to a different rent adjusted amount, even if the lease provides for a CPI adjustment, but agreement on rent reviews is not always easy to reach.
Fixed rent adjustment
In a fixed rent adjustment situation, the rent will increase by a fixed amount at specified intervals, regardless of changes in the market rent amount or CPI. This method of rent adjustment can provide both the landlord and tenant with certainty on rent amounts moving forward.
Limits for a rent review/adjustment
The lease may also provide for a limit for the rent review. Most leases specify that the reviewed/adjusted rent will not be less than the rent payable immediately before the relevant review or adjustment date, which means that the rental amount will either increase or stay the same. It won’t decrease!
Some leases specify that the rent will not be less than the annual rent payable at the commencement of the current lease term. Other leases specify that the rent will not be less than the rent payable at the commencement of the lease, though this is not common. The landlord and tenant are free to agree to an alternative method of limiting rent reviews if it suits their circumstances.
Important to understand the process
It is very important for both the landlord and the tenant to understand the rent review processes in the lease, as it can have significant implications for both parties. We can assist if you have any questions on your lease rent review process.
DISCLAIMER: All the information published in the Property eSpeaking, Commercial eSpeaking, Trust eSpeaking, Rural eSpeaking, and Fineprint newsletters is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property eSpeaking, Commercial eSpeaking, Trust eSpeaking, and Fineprint may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2025. Editor: Adrienne Olsen. E-mail: [email protected]. Ph: 029 286 3650 or 04 496 5513.
