Rent-free period
A period at the start (or sometimes during) a lease where no lease payments are due — a common form of lease incentive.
Definition
A rent-free period is a concession granted by the lessor where the lessee pays no rent for an initial period — typically at the start of a new lease to allow for fit-out or transition. Under the old operating lease model, rent-free periods were spread evenly over the lease term as a straight-line adjustment. Under IFRS 16 and amended FRS 102, a rent-free period reduces the lease incentives received and therefore the initial ROU asset. The lease liability is measured based on the payment profile that reflects the actual nil-payment period followed by the normal payment amounts.
Why it matters
Rent-free periods are among the most common lease terms in commercial property and must be reflected correctly in the payment schedule used to measure the initial lease liability.
In AuditLease
The AuditLease payment schedule and commencement date fields allow users to model rent-free periods by setting the correct start date for actual payments.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence — so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.