Reading time: 3 minutes

How does a market rent review work? Does it involve parties guessing the premises’ ‘market value? Do they pick a ballpark figure and hope that the other party agrees? The process of conducting a market rent review in a lease document is not always straightforward, and many variations depend on how parties draft it into the lease. Below we will discuss the market rent review process in both retail and commercial leasing.

Retail Leases

State-based retail legislation governs retail leases and prescribes the procedure for how market rent review should be carried out. Generally, ‘current market rent’ is taken to be the rent that a landlord would reasonably expect a tenant to pay in an arm’s length transaction were the shop unoccupied and offered for renting. If a landlord and tenant cannot agree on the current market rent, a valuer is to be appointed with both parties making submissions and bearing the valuer’s cost equally. The landlord must typically determine the market rent within a stated timeframe and in some states, a tenant’s option notice is extended until a certain time after the landlord determines the current market rent. Consequently, the tenant can exercise its option after being notified of the new market rent. 

Commercial Leases

For commercial leases and other non-retail leases (not regulated by retail legislation), the process is similar, but the landlord has greater discretion when determining market rent review, and what they take into account. The landlord can determine the current market rent any time up to six months after the commencement of the new term and request the tenant to back date the payment to the lease commencement date. This raises potential problems for tenants who want to know the market rent before making the decision to renew their lease. Unlike retail leases which retail legislation protects, commercial and non-retail leases may contain a ratchet provision which prevents the rent from going down. Consequently, if the current market rent is subject to a ratchet provision and can only increase in value, it does not necessarily reflect the true ‘market’ value of the property.

Key Takeaways

The process of market rent review largely depends on how it is drafted in the lease. As such, it is prudent that you understand this process before committing to a lease – particularly how it is calculated, what is taken into account and the dispute resolution procedure. If you would like assistance in reviewing your lease document or require advice before entering into your lease, get in touch with our experienced commercial leasing team on 1300 544 755.


How to Protect and Enforce Your Trade Mark

Wednesday 11 May | 11:00 - 11:45am

Protect your business’ brand from copycats and competitors. Register for this free webinar to learn how.
Register Now

Corporate Governance 101: Responsibilities for New Directors

Friday 13 May | 11:00 - 11:45am

If you are a new company director, join our free webinar to understand your legal compliance obligations. Register today.
Register Now

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer