Term of lease and rent (grant of a lease)

Residential long lease

long lease (e.g. 99/999 years) granted for premium

Ground rent (residential)

historically small annual rent (e.g. £150)

Peppercorn rent

nominal rent required for most new long residential leases post-2022

Commercial rent (FRI lease)

yearly rent (e.g. £80,000) payable quarterly

Quarter days (traditional)

25 March, 24 June, 29 September, 25 December

Quarter days (modern)

1 January, 1 April, 1 July, 1 October

Rent payment timing

usually payable in advance

Rent if lease silent

payable in arrears

Apportionment of rent

adjusted for part-period occupation

Other payments as rent

service charge and insurance treated as rent

Break clause

allows tenant (or landlord) to terminate lease early

Purpose of break clause

compromise between long term and tenant flexibility

Rent review (general)

no automatic right, must be expressly provided

When rent review used

typically leases over 5–10 years

Stepped rent

fixed increases at set intervals

Turnover rent

based on tenant’s business turnover

Index-linked rent

linked to inflation (e.g. RPI)

Open market rent

based on comparable market rents

Upwards only rent review

rent can increase or stay same, never decrease

Rent review agreement

parties try to agree new rent first

Dispute resolution

independent valuer determines rent if no agreement

Valuer considerations

comparable premises + hypothetical lease terms

Hypothetical lease

imaginary lease based on actual lease with assumptions and disregards

Basic assumption (vacant premises)

premises assumed available to let

Basic assumption (willing parties)

willing landlord and tenant

Assumption (tenant compliance)

tenant complied with covenants (fair)

Assumption (landlord compliance)

landlord complied with covenants (often unfair to tenant)

Assumption (same lease terms)

based on actual lease except rent

Assumption (term remaining)

term equals remaining lease term (context dependent)

Assumption (premises repaired)

premises assumed in good condition

Disregard (tenant’s occupation)

ignore added value from current tenant’s presence

Disregard (goodwill)

ignore value of tenant’s business reputation

Disregard (tenant improvements)

ignore voluntary improvements by tenant

Purpose of disregards

prevent tenant being penalised for own improvements

Rent review outcome

new rent reflects market, excluding tenant-specific value

Rent review memorandum

document recording agreed new rent

Backdating of rent

new rent applies from review date

Balancing payment

tenant pays arrears plus interest if review delayed

Key exam principle

open market rent review uses assumptions and disregards to reach fair rent