Rent Review Clauses: The Role of the Competition and Markets Authority

What are Rent Review Clauses?

Rent review clauses are a common feature of commercial leases, allowing landlords to adjust the rent paid by tenants periodically during the lease term. These clauses typically specify the frequency of the reviews, the method for calculating the new rent and the conditions under which the rent can be increased or decreased. Rent review clauses can have a significant impact on the financial performance of a business, so it is important for tenants to understand their rights and obligations in this regard.

The Competition and Markets Authority (the "CMA") is an independent government body that enforces competition and consumer protection laws in the UK. The CMA has a role to play in regulating rent review clauses to ensure that they are fair and do not harm competition. In particular, the CMA has been concerned that some landlords may use rent review clauses to increase rents unfairly or to deter tenants from negotiating better lease terms.

To address these concerns, the CMA has issued guidance on rent review clauses, which sets out its expectations for landlords and tenants. The guidance emphasises the importance of transparency and clarity in rent review clauses, and highlights some of the key issues that should be considered when negotiating these clauses. For example, the guidance suggests that rent review clauses should be linked to an objective and independently verifiable benchmark, such as an index of retail prices or a measure of rental values in the local area.

The CMA has also taken enforcement action against landlords who have breached competition law in relation to rent review clauses. In 2018, the CMA fined a property management company £1.6 million for using unfair contract terms, including rent review clauses, in leases for residential properties. The company had included clauses that allowed it to increase rents at any time without justification, and also required tenants to pay for repairs that were the responsibility of the landlord.

More recently, the CMA has launched an investigation into the use of rent review clauses in the care home sector. The investigation is looking at whether some care home providers may be breaching consumer protection law by using unfair terms in their contracts, including rent review clauses that are not transparent or that allow for excessive rent increases.

Overall, the involvement of the CMA in regulating rent review clauses is a positive development for tenants, as it helps to ensure that these clauses are fair and do not harm competition. Tenants should be aware of their rights under competition and consumer protection law, and should seek advice if they have concerns about the terms of their lease. By working with tenants to ensure that rent review clauses are transparent, fair, and reasonable, landlords can build stronger, more sustainable relationships and help to create a more competitive and dynamic commercial property market.

If you'd like more information, you can contact our Commercial Property Solicitors who will be happy to help.