Leasehold and Freehold Reform Act 2024

Lease subject to a rent review with fixed changes

37 (1) This paragraph applies to a lease if the rent under the lease is subject to a rent review which provides that, over the unexpired term of the lease—

(a) the rent will change each time one or more periods (a “review tranche”) begins,

(b) the length of the review tranche, or each of them, is known at the valuation date (and, in a case where there are two or more review tranches, it does not matter if they are the same or different lengths), and

(c) the amount by which the rent will change at the beginning of the review tranche, or each of them, is known or can be calculated at the valuation date (and, in a case where there are two or more review tranches, it does not matter if the amount of each change is the same or different).

(2) The term value is the sum of—

(a) the term value for the period (the “current tranche”) that begins with the valuation date and ends immediately before the start of the first (or only) review tranche after the valuation date, and

(b) the term value or values for each (or the) subsequent review tranche.

(3) The term value for the current tranche is determined using this formula—

where—

• c is the applicable capitalisation rate;

• r is the rent at the valuation date (but see sub-paragraph (4));

• n is the length (in years) of the current tranche.

(4) If paragraph 26(3) requires the notional annual rent to be used instead of the rent at the valuation date to determine the term value of the lease, r is the notional annual rent.

(5) The term value for a review tranche (the “relevant review tranche”) is determined using this formula—

where—

• c is the applicable capitalisation rate;

• r is the rent during the relevant review tranche (but see sub-paragraph (6));

• n is the length (in years) of the period that begins with the valuation date and ends with the day before the first day of the relevant review tranche.

• t is the length (in years) of the relevant review tranche.

(6) If paragraph 26(3) requires the notional annual rent to be used instead of the rent during the relevant review tranche to determine the term value of the lease, r is the notional annual rent.