The lease decides how the rent is decided.
A market rent determination is an independent assessment of the rent a property would command on the open market at a date fixed by the lease. It matters because the lease clause governs everything — the review date, the basis of assessment, whether the rent can go down as well as up, what assumptions must be made about the premises and the term, whether incentives are disregarded, and sometimes the qualifications the valuer must hold. A determination that ignores the clause is not binding and not useful. The first thing we do is read it.
Two different roles, and the lease says which.
An assessment is advice to one party. A landlord or tenant instructs it privately to understand where the rent should sit before negotiating, or to test a figure the other side has put forward. It is not binding on anyone.
A determination is different. Where the lease provides for a valuer to determine the reviewed rent — often on the parties’ joint appointment, or by nomination through a professional body when they cannot agree — the valuer acts as an expert whose figure binds both sides, subject to whatever the clause says about submissions and reasons.
The two require different conduct. In a determination the valuer must be, and be seen to be, independent of both parties, must usually invite submissions from each, and must produce reasons capable of being read by the losing side. Confusing the roles is a common source of dispute about whether a determination is valid.
Five things worth checking before anyone is appointed.
The review date and the assessment date. They are not always the same, and evidence must be drawn from the right one. A determination dated to the wrong day is vulnerable.
Whether the rent can decrease. Many clauses include a ratchet preventing the reviewed rent falling below the current rent. Whether that applies changes the exercise entirely.
The assumed premises and term. Clauses commonly direct the valuer to assume vacant possession, a fit-out in a particular state, a hypothetical willing lessee, and a term equal to the remaining or a stated period. These assumptions can move the figure materially.
Incentives. Whether comparable evidence is to be analysed on a face or effective basis — that is, whether rent-free periods and fit-out contributions in comparable deals are disregarded — is one of the most consequential instructions in the clause.
Who appoints, and what qualifications are required. Some clauses specify a Certified Practising Valuer, a minimum period of experience, or nomination by a professional body. Appointing outside those terms can invalidate the result.
Instructing a determination properlyRead the lease, then look at the market.
The clause first. Send it with the enquiry. We will tell you what it actually requires, whether the exercise is an assessment or a determination, and whether we are qualified under its terms — before anyone is appointed.
Evidence, analysed on the basis the clause specifies. Comparable lettings around the assessment date, adjusted for the differences that matter and analysed on a face or effective basis as directed. The report shows the analysis, not just the conclusion.
Submissions from both sides where the role requires it. In a determination each party is given the opportunity the clause provides, and the reasons address what they put. That is what makes a determination hold rather than become the start of a second dispute.
Four questions, answered plainly.
What is the difference between a rent assessment and a rent determination?
An assessment is private advice to one party and binds nobody — it is used to prepare for or test a negotiation. A determination is made under a lease clause that gives a valuer the power to fix the reviewed rent, and it binds both parties subject to the terms of the clause. A determination requires independence from both sides, usually an opportunity for each to make submissions, and reasons the losing party can read.
Can the rent go down at a market review?
It depends entirely on the clause. Many leases contain a ratchet provision preventing the reviewed rent from falling below the current rent, in which case the answer is no regardless of what the market has done. Where there is no ratchet, a market review can produce a reduction. This is the first thing to check, because it determines whether a review is worth initiating at all.
Does the valuer have to inspect the premises?
For a market rent assessment or determination, yes in practice. The condition, layout, fit-out, services and access of the premises materially affect what a hypothetical lessee would pay, and the lease often directs specific assumptions about the state of the premises that cannot be verified from records. Where a clause directs an assumption contrary to fact — for example vacant possession or a stripped fit-out — the valuer still needs to see what is actually there in order to apply the assumption properly.
Who pays for a determination?
The lease usually says. Commonly the cost is shared equally between landlord and tenant where a valuer determines the rent, and borne by the instructing party where the exercise is a private assessment. Some clauses provide for the party whose figure is further from the determination to bear the cost. Check the clause before appointing, and we will confirm our fee in writing to whoever is liable for it.
Where this connects to the rest of the file.
Appointment and instruction
Getting the appointment and the letter of instruction right so the determination holds.
Which valuation you need
Eleven purposes and who has to accept each report.
Bases of value and evidence
What a report must contain to survive review, with primary sources.
What sets the fee
A determination with submissions from both parties is a larger scope than a private assessment.