A business was due for a rent review under a commercial lease.  They received a notice from the landlord detailing what the landlord proposed as the rent for the next period of the lease. 

The rent proposed by the landlord was double what they were currently paying and the tenant did not think this was fair.  They contacted their lawyer to find out about their rights.

If you have entered into a commercial lease, whether as a landlord or tenant, it’s important to know how the rent review procedure works, and what happens if there is a dispute.

This article summarises the obligations under the ‘standard’ Auckland District Law Society form of Deed of Lease, used extensively in New Zealand. If you have a different lease, your obligations will be different, and you should seek legal advice.

The First Schedule of your Deed of Lease will specify the rent review date or dates. These dates are important as neither party can give notice earlier than three months before the particular rent review date.

The party giving notice of a rent review is regarded as the ‘Initiator’ and the party receiving notice is the ‘Recipient’. It’s important to note that this Lease allows for a tenant to be an ‘Initiator’.

The Recipient has 20 working days after receiving notice of the proposed rent from the Initiator to dispute the proposed rental. If the Recipient fails to respond to the Initiator within 20 working days, it will be deemed that the Recipient has accepted the Initiator’s proposed rent price.

In any scenario, the new rent price cannot be any lower than the rent paid during the current term of the lease. This provision is known as a ‘ratchet clause’.

What happens if there is a dispute?

If the Recipient disputes the Initiator’s proposed rent, then both parties are required to try and come to an agreement within 10 working days.

If such agreement is not reached, one method of resolving the dispute is for one party giving written notice to the other party requiring that the new rent is to be determined by arbitration.

The second method is through the use of registered valuers who are to act as experts. Each party appoints a valuer and gives written notice to the other party of such appointment within 20 working days of the parties agreeing to use this method.

If one of the parties fails to appoint a valuer within that time, then the appointed valuer of the other party will determine the new rent. The determination will be binding.

If both parties have appointed a valuer, the two valuers will determine the current market rent of the premises. If they cannot agree, then the two valuers should appoint an umpire who will make a determination.

Both parties will be jointly liable for all costs unless they agree otherwise.

What rent is payable in the interim?

The rent payable during the dispute will differ according to the circumstances. If both parties supply a registered valuer’s certificate, the interim rent will be half way between the proposed rents.

If only one party supplies a registered valuer’s certificate, then the new rent will be the value stipulated on the certificate.

If no registered valuers’ certificate is supplied, the interim rent will be the same amount as the rent payable before the relevant market rent review date.

It pays to get legal advice if you are undergoing a rent review for your commercial lease in order to understand your obligations as getting the process wrong can have unintended and serious consequences.


Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Rachel Collins