A rent review construction issue in the LIV standard lease that keeps coming up… part 2

My colleague Matthew McCarthy from the firm McCarthy Lawyers has pointed out that the May 2021 revision of the LIV standard lease seeks to fix the problems discussed in my previous post here.

Clause 12.2 of the new revision states that:

12.2     The lease for a further term:

…

12.2.2. has a starting rent determined in accordance with item 13 …

Item 13 of the Schedule to that revision says (underlining added):

Review date(s)

Term

(a)        Market review date(s):

(b)        CPI review date(s):

(c)        Fixed review date(s) and percentage or fixed amount increases:

Further term(s)

(a)        Market review date(s):

(b)        CPI review date(s):

(c)        Fixed review date(s) and percentage or fixed amount increases:

This re-draft probably addresses the issue, provided that the Schedule is filled out correctly.  

You need to bear in mind that a further term is a new lease, so has a new commencement date.  Lots of people incorrectly treat the option term as an extension of the old term – it isn’t.

That means that the parts of Item 13 of the Schedule that are underlined above need to define the review method for: 

1. the starting rent for the further term(s) (usually a market review, but not necessarily);  and
2. the rent reviews for each subsequent year of the further term(s) (usually annual CPI or fixed percentage, but, again, not necessarily).