NSW Commercial Rent Increases: Retail vs. General Guidelines

In New South Wales (NSW), adjusting a commercial tenant's rent requires strict adherence to the exact wording of your lease contract. While general commercial leases are governed largely by free-market negotiation, retail leases are heavily policed by the Retail Leases Act 1994.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Executing a flawed rent review can permanently cost you the revenue uplift. Always consult a commercial property lawyer. Information last verified: March 2026.

General Commercial Leases

If your property is a standard office, warehouse, or industrial space (non-retail), there is no statutory government cap on rent increases.

The amount, frequency, and method of the rent increase are determined 100% by the signed lease agreement. The standard methods used in NSW commercial leases include:

• Fixed Percentage Increase: Rent goes up by a set amount (e.g., 4%) annually.
• CPI Indexation: Rent increases exactly in line with the Consumer Price Index for Sydney.
• Market Rent Review: Usually triggered when the tenant exercises an option to renew their lease for a subsequent multi-year term. An independent valuer assesses the current open-market rate for the premises.

In general commercial leases, landlords often include a combination of these methods (e.g., "The greater of 4% or CPI").

Retail Leases Act Protections

If the property is a retail shop or falls under the Retail Leases Act, the rules change drastically to protect the tenant.

1. The Ban on "Ratchet Clauses"

In general commercial leases, landlords use "ratchet clauses" to protect market reviews (e.g., "The market rent review will occur, but the new rent cannot be less than the rent paid in the preceding year").

Ratchet clauses are entirely illegal in NSW retail leases. If a retail tenant opts for a market rent review during their renewal, and the real estate market has collapsed, the landlord is legally forced to drop the rent to match the current lower market value.

2. Conflicting Review Methods Prohibited

A retail lease cannot force a tenant to accept the "highest" of two differing rent review methods. For example, a clause stating rent increases by "CPI or 5%, whichever is higher" is void under the Act. A single specific method must be selected for that respective year.

3. Early Determination of Market Rent

Historically, tenants had to legally commit to exercising a multi-year lease option before knowing what the new market rent would be. NSW reformed this process for retail tenants.

Under the Act, a retail tenant has the right to request an "early determination" of the current market rent. They must make this request in writing between 3 and 6 months prior to their deadline for exercising the option. The landlord must comply, allowing the tenant to know the exact rent price before committing to the renewal.

4. 12-Month Minimums

A retail lease cannot include a provision for a rent change less than 12 months after the lease commences, nor less than 12 months after any preceding rent adjustment (with exceptions for outgoings or turnover rent structures).

Executing the Review Flawlessly

Even a perfect lease is useless if you miss the anniversary date to trigger the review. Many commercial leases have "use it or lose it" clauses—if a landlord fails to serve a rent review notice within 30 days of the anniversary, they forfeit the right to increase the rent for that entire year.

Landager maps the exact structured rent reviews hidden in your commercial lease PDFs directly into a visual timeline, sending alerts to serve notices 45 days before the statutory cutoff, ensuring you capture maximum yield.

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