In brief - Type and basis of rent reviews controlled by
For landlord and tenants, any major increases or reductions in
rent have significant ramifications. In Australia, the law controls
the type and the basis of rent reviews which can be undertaken. In
the context of retail leases, the law controlling rent review is
similar whether it is a major shopping centre, a strip shop or a
stand alone shop.
Standard types of rent review
The standard types of rent review are the following three:
Inflation adjustment or consumer price index adjustment on a
Market rent review to bring the rent up or down to the current
Fixed amount or fixed percentage increases so that the rent
steps up or steps down by agreed amounts of money or percentages at
General rent review provisions
The position on rent reviews is similar in each state and is
largely governed by the legislation in that state. Some features
regarding the timing and basis of rent reviews are highlighted
A lease must specify when the rent reviews are to be conducted
and the basis on which they are to be made.
In most states, a lease must not provide for a change to base
rent more frequently than 12 monthly after the first anniversary of
the commencement of the lease. An exception to this provision
applies in NSW and South Australia if the change in rent is by a
specified amount or percentage.
"Ratchet clauses" which have the effect of preventing
the rent from decreasing on a market rent review are void in every
A rent review can be made on the basis of a fixed percentage,
an independently published index of prices or wages, a fixed annual
amount, the current market rent or a basis or formula prescribed by
Methods of undertaking rent reviews in different states
In Victoria, Queensland, Tasmania and Northern Territory, the
methods by which a rent review may be undertaken are prescribed by
In NSW and South Australia, a provision of a retail shop lease
is void to the extent that it allocates to one party discretion to
decide which of two or more methods of calculating a change to base
rent is to apply, or provides for base rent to change in accordance
with whichever of two or more methods of calculating the change
would result in the higher or highest rent.
In NSW a lease provision is void if it provides a method of
calculating a change to the base rent but allocates to one party a
discretion to decide whether or not the base rent is to be changed
in accordance with that method, while in South Australia, the
allocation of the decision to one party regarding whether or not to
review rent is also void.
Lease provisions which are contrary to legislation
Despite what parties may write into their lease, the basis for
the type of review, the timing of those reviews and the method in
which the reviews are undertaken are largely governed by the
legislation of each state. If a provision of a lease is contrary to
the legislation, then the offending provision in the lease is of no
Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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