How a Commercial Rent Review Works (and When You Need an Independent Valuer)

Every commercial lease has a moment built into it where the rent gets reset. How that reset works — and, for retail premises, what the law allows — decides whether the rent goes up, holds, or actually falls. Get it wrong and a landlord under-collects for years, or a tenant overpays on a number nobody tested. Here is how rent reviews work in Australia, why retail and non-retail are different animals, and the point where an independent valuer earns their fee for either side.

The four ways a commercial rent gets reviewed

A lease will use one (or a mix) of these mechanisms:

• Fixed increase — rent rises by a set percentage (often 3–5%) or a set dollar amount on agreed dates. Predictable, lands every year.
• CPI-linked — rent moves with the Consumer Price Index for the relevant capital city. Tracks inflation, but can be volatile.
• Market review — rent is reset to current market rent for comparable premises, as if a willing (but not anxious) landlord and tenant agreed it fresh at the review date. This is the one that needs evidence — and often a valuer.
• Combinations / "greater-of" — many leases stack methods: annual CPI or fixed bumps during the term, then a market review at each option/renewal, sometimes drafted as "the greater of the passing rent and market rent."

Typical pattern: annual fixed or CPI reviews through the term, with a market review every 3–5 years and almost always at the start of a renewal term. The lease is the rulebook — but for retail, statute overrides parts of it.

The ratchet clause — and why retail is the exception

A "ratchet clause" stops rent from ever falling on review ("the new rent must not be less than the current rent"). It also hides inside "greater-of" market reviews and "upwards-only" CPI clauses.

Here's the divide that catches people out:

• Retail leases are governed by each state's Retail Leases Act, and those Acts generally prohibit ratchet mechanisms — so a genuine market review can move the rent down, not just up. The relevant statutes include the Retail Leases Act 1994 (NSW), the Retail Leases Act 2003 (VIC), the Retail Shop Leases Act 1994 (QLD), and equivalents in SA, WA, TAS, the ACT and NT. A "no-decrease" or "greater-of" market clause in a retail lease is generally void to the extent it conflicts with the Act.
• Non-retail commercial, office and industrial leases are contract-governed. There's no general ban — courts will enforce a clearly drafted "rent shall not be less than" or "greater-of" clause. The ratchet is allowed, so the lease wording is everything.

So the first question on any review is: is this a retail lease or not? The answer changes whether the rent can legally fall.

The exact rules — which premises count as "retail", timeframes, and the statutory criteria — vary by state. Confirm the position for your premises with the relevant Retail Leases Act or your lawyer.

A market review, step by step

When a market review falls due, the process usually runs like this:

1. Landlord's notice. The landlord serves a notice (often 1–3 months before the review) stating its assessment of market rent.
2. Tenant's response. If the tenant doesn't dispute it within the set window, the landlord's figure becomes the new rent.
3. Disagreement → an independent valuer. If the parties can't agree, the lease (or the Act) requires an independent valuer to determine current market rent. Appointment is usually by mutual agreement, or — failing that — by nomination from a third party, commonly the President of the Australian Property Institute (API).

For retail leases the valuer is typically a Specialist Retail Valuer (SRV), and statute sets the path. In Queensland, for example, if the parties don't agree within one month of the review date, an SRV must determine the rent, and if they can't agree on who that is, QCAT appoints one. Other states have their own routes — often via the lease, the Act, or the state Small Business Commissioner.

One detail that matters: the valuer almost always acts as an independent expert, not an arbitrator. Their determination is final and binding except in narrow cases (manifest error or fraud) — there's no general right of appeal on the number. That's exactly why the valuation has to be right the first time.

What a valuer actually weighs

"Current market rent" isn't a guess at a per-square-metre rate. A valuer builds it from evidence and adjusts for the things that move real rents. Retail statutes spell out the test (the NSW Act's s 31 criteria are widely mirrored), and good practice applies it everywhere:

• Comparable lettings — recent leases of similar size, location, quality and permitted use.
• Incentives — rent-free periods, fit-out contributions and cash incentives are common, so headline rents have to be normalised down to an effective rent before they're comparable. Ignoring incentives is the single most common way a market figure comes out wrong.
• Gross vs net and outgoings — comparable rents have to be put on the same basis (who pays the outgoings), or you're comparing apples to oranges.
• The lease terms themselves — term, options, review structure, permitted use, make-good and fit-out obligations all shift value.
• What's excluded — the valuer must not count goodwill the tenant built up, or the value of the tenant's own fixtures and fittings.

Non-retail reviews use the same techniques but follow the lease's definition of market rent rather than a statutory list — so the lease drafting drives the answer.

When to get an independent valuer — for either side

A rent review is one of the few moments where the same number is a cost to one party and income to the other, with no easy appeal once it's set. It's worth an independent assessment when:

• You're a landlord setting the market-rent notice and want a defensible figure, not an optimistic one a tenant will dispute and beat.
• You're a tenant facing a notice that looks high — an independent view tells you whether to accept, negotiate, or push to formal determination before the window to dispute closes.
• You're either party heading into an option renewal, a determination, or a disagreement that's going to an SRV — your own evidence-based assessment is what the determining valuer will weigh.

The takeaway

The mechanism and the lease decide how the rent moves; the law decides whether retail rent can fall; and the evidence — comparables, incentives, outgoings — decides the actual number. Because a market determination is usually final and binding, the time to get the figure right is before it's locked, not after.

If you need an independent market rent review valuation — as a landlord, a tenant, or for a determination — you can request a quote. (See also how commercial property is valued and our commercial valuations.)

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Sources

• Queensland Small Business Commissioner — Annual rent increases and market reviews (Retail Shop Leases Act 1994, SRV & QCAT)
• Sparke Helmore — Market rent reviews in commercial and retail leases (NSW Retail Leases Act 1994, s 31 factors)
• Australian Property Institute

Last verified 27 June 2026. Retail leasing law, the definition of "retail", and rent-review processes vary by state and by lease — this is general information, not legal advice. Confirm the position for your premises with the relevant Retail Leases Act, your lease, and a qualified adviser.