If you have a pre-agreed fixed rate rental review in place (like a consumer price index (CPI) adjustment or stipulated percentage increase), this will always happen as set out in the lease.
If you don't have a fixed agreement in place, you must get an independent rental market valuation from a registered valuer before agreeing to any variation.
Any valuation report should be compliant with the New Zealand Institute of Valuers Valuation Standards and include:
- market rental
- evidence of comparable rents and analysis and reconciliation of the evidence to the market rent for the premises (and car parks if any)
- copies of any specialist technical advice (like engineering reports) referred to during the valuation process
- details of which improvements are included or excluded in the determination of the market rental.
If you have any queries about rental valuations, contact us. We may be able to provide information from other recent valuations of a similar type.
In a falling market, a landlord may not instigate a rental review unless they have to. In these cases, agencies should get a valuation report and instigate the rental review if the valuation shows a decreased rent.
If a lease has a ratchet clause, understand whether it is:
- a soft ratchet clause, which means the rental figure will never drop to less than the original sum agreed between the landlord and the tenant, or
- a hard ratchet clause, which means the rental figure will never drop to less than the last rental figure agreed at the previous rental review.
Ensure you understand and stick to any clauses that refer to ‘time being of the essence’.