Rent review
A contractual mechanism allowing the rent to be reviewed and potentially reset at a specified date.
Definition
Rent review clauses in commercial property leases allow the rent to be reviewed, typically upwards only, at set intervals, often every three or five years. Where the new rent is set by reference to an index or to market rentals, the payments depend on an index or rate: they are included in the lease liability at the rent in force at commencement, and the liability is remeasured, at the original discount rate, when the reviewed rent takes effect. A fixed uplift written into the lease is a fixed payment and is in the liability from commencement. A rent change agreed outside what the lease provides is a lease modification, accounted for from its effective date at a revised discount rate.
Why it matters
Whether the new rent is set by an index or market rentals, is a fixed uplift already in the liability, or is agreed outside the lease affects when and at what discount rate it reaches the lease liability.
In AuditLease
AuditLease records the next rent review date on the lease and shows it in the key dates and the calendar. It does not remeasure the lease automatically when a review settles: record the outcome on the lease as a remeasurement with its effective date.
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.