Among all the terms in a commercial lease, market rent review mechanisms are the most consequential and often least properly understood. These clauses determine how rent resets during the life of the lease and can have a material impact on long‑term occupancy costs that bears little relationship to what appeared reasonable when heads of agreement were signed.
“The devil is in the detail.”
Depending on how they are structured, market review clauses can protect tenants in softer leasing conditions or expose them to significant, often upward‑only rent pressure in tighter markets. It’s important to note – you are never on a level playing field with even the “best” – fairest market review clauses. Owners regularly control and manipulate the information on lease deals available – so tenants must never accept mid term market reviews during lease terms (except with extreme care and construction), and only rely on market reviews at option terms as a last resort. A poorly worded ratchet clause or an ambiguous market definition can reset a tenant’s cost base dramatically, often with limited ability to challenge the outcome after the fact. These provisions must be understood thoroughly and negotiated with care before a lease is executed.
