What is the purpose of a rent review clause?

The purpose of a rent review clause is to allow adjustments based on market conditions. This clause is essential in lease agreements as it provides a mechanism to reassess the rent at specified intervals or under certain conditions. By linking rent increases or decreases to prevailing market rates, the rent review clause helps ensure that the rental price remains fair and competitive, reflecting the current economic environment and property values. This aspect is particularly crucial in long-term leases where significant changes in market conditions could impact the desirability and financial viability of the lease for both parties.

By allowing rent adjustments based on market conditions, the lease can better accommodate fluctuations in the economy, such as inflation or changes in the demand for rental properties, which might not align with fixed rent schedules. This flexibility benefits both landlords and tenants by aligning expectations and protecting against unanticipated financial imbalances.