Rent Review vs Rental Determination: What is the Difference?

By Samantha Grant

Rent review/rental determination, two words that you may have heard but never fully understood. When it comes to your lease terms and entitlements as a tenant having a clear understanding is vital. You may think a rental review or determination may be unnecessary, but it plays a critical role in the relationship between landlord/tenant. whether you’re occupying a residential property or running a business, rent will be one of the most significant expenses therefore, the rent payable must reflect the true market value.

In saying this where does one even begin? We will discuss the difference between these two terms so that you can better understand how to use them in your real estate business or property.

What is a Rent Review?

Simply put, a rent review is a report that is completed to re-evaluate the current rental market value. Depending on the type of lease, a rent review can be requested or scheduled at any time.

For businesses with commercial leases, a rental review is scheduled usually in the middle of the lease, otherwise known as a Mid Term lease market review this is commonly used only in long-term leases (more than five years).

A market rental review is less commonly used in residential leases, as most leases are between 6-12 months, with this said a rental review for a residential property does not have to be completed annually, it is however recommended every few years to account for any changes in the market or with renewal stages of a lease agreement.

Having a rental review completed regularly to re-evaluate the market conditions is essential in maintaining a fair price as well as a steady relationship between landlord and tenant. 

Evidence of the market research and property conditions can be submitted by both parties for the rental review. This can be done independently or by a property valuer. The evidence submitted will determine whether or not the rental value remains or should be increased. 

Considered in a rental review:

• The property size (both land size and floor layout) 
• Comparable rental prices 
• The location of the property 
• The proximity of the property to local transport, recreational facilities, and public buildings 
• The condition of the building including amenities and facilities 

What is Rental Determination?

With a lot of similarities to a rent review, the purpose of a rental determination is entirely different. When a landlord/tenant cannot come to an agreement with the rental value of the property, a valuer can perform an independent rental determination to assist with negotiations between the landlord and tenant.

With multiple reasons why a rental determination is completed, in commercial leases, the most common cause is due to rising conflict. An independent valuer will be assigned to each party to maintain transparency, regaining confidence that the final outcome is based on an unbiased evaluation.

During a rental determination, the property valuer will complete a comprehensive report based on the following: 

• The property is in proximity to the nearest city as well as street placement and road access
• Internal property factors and layout
• A review of the current rental market 
• Comparable rental prices 
• Historic sales and prices 
• Current market conditions – including supply/demand

Do you need a rent review/ rental determination?

Yes, to ensure that the rent payable is consistent with the current market value, every tenant can request the option of a rental review. The rental market is never dull, so it can be easy to dismiss the need for a rental review because of convenience and price.

Taking advantage of requesting a rental review especially during times of upcoming local area developments and economic downturn, will determine the true rental value that will benefit you in maintaining a stable landlord/tenant relationship, as well as saving you time and money.

Keeping in mind a rental determination must be completed by a property valuer with at least five years of experience and be accredited by the Australian Property Institute (API). A mutual agreement on a fair, unbiased rental market value is one of the benefits of an independent property valuer.

Final Thoughts

There are significant benefits in obtaining an independent property valuer to conduct a valuation for the tenant or landlord. A detailed rent review/ rent determination report ensures that the rent payable is reflective of the current rental value. This certifies the tenant isn’t paying more than they should be, and to confirm the landlord is receiving the correct amount.

Whether you are a tenant or a landlord, having a comprehensive valuation is beneficial to ensure a fair rental price. If you require a property valuation, or would like to learn more information, contact us today to speak to an industry expert.

About the Author

Samantha Grant is a specialist in her field and has been working within the property valuation industry for over 20 years. As a Senior Valuer, Samantha is an authority in all forms of residential, commercial, and industrial valuations and has served as an expert witness in high profile litigation proceedings. Samantha’s professional knowledge is often utilised in industry conferences, seminars and performs guest lectures as an industry expert.

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