How to Implement a Rent Increase for Your Commercial Property in WA

Managing a rent increase for a commercial property requires more than simply notifying your tenant of a new amount. It involves compliance with your lease agreement, Western Australian tenancy laws, and clear communication to avoid disputes.

Whether you manage a retail shop, office, or industrial property, following the right process ensures your rent increase is valid, fair, and enforceable.

How to Prepare for a Rent Increase on Your Commercial Property

Before implementing any change, review the existing lease carefully. Most commercial leases in Western Australia include a rent review clause that outlines how and when rent can be increased.

The clause might refer to a fixed percentage increase, a Consumer Price Index (CPI) adjustment, or a market rent review. These methods determine how the new rent amount is calculated and when it can take effect.

For retail premises, the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) sets additional rules. Under this Act, only one method of rent review can apply at a time.

For example, you cannot combine CPI and market review in a single adjustment. The law also prevents “ratchet clauses” that stop rent from decreasing in a market review. These protections are designed to ensure retail tenants are treated fairly and to prevent landlords from imposing unreasonable increases.

Preparing for a rent review means gathering the right information. Property owners should understand current market conditions, obtain recent data on comparable rents, and, if necessary, seek a valuation.

This ensures that any proposed increase reflects the market and can be supported if challenged.

Legal Requirements for a Commercial Rent Increase Notice

Once you’ve determined the appropriate method of review, you must provide formal notice to your tenant.

The lease will specify how and when this must occur.

Most leases require that a commercial rent increase notice be issued in writing, stating the current rent, the proposed new rent, the date the increase takes effect, and the basis for calculation. 

However, suppose the lease is silent on the initiation time for a retail lease specifically. In that case, the Act supplies a default window: the review may be initiated not more than three months before, and not more than six months after, the review date. The statutory timing only fills the gap where the lease does not specify it.

How to Implement a Commercial Lease Increase Effectively

After confirming the legal requirements, implement the rent increase according to the lease.

If the review is based on CPI, you’ll need the most recent index from the Australian Bureau of Statistics to calculate the adjustment. Fixed-dollar or fixed-percentage increases are simpler, provided the calculation matches the agreed clause.

Market rent reviews are more complex. In this case, the lease may require that the rent be determined by reference to current market rates for similar properties.

Often, landlords and tenants will obtain valuations or engage an independent valuer if they cannot agree on a figure. The valuer’s determination will typically be binding, unless a dispute arises over the process.

Once the new rent is agreed or determined, confirm it in writing and ensure your tenant acknowledges receipt. The updated rent should be reflected in all future invoices or rental schedules. Maintaining clear records of how the increase was calculated and when notice was given is essential if any issues later arise.

When and How to Issue a Commercial Rent Increase Notice

Work back from the review date in your lease so the tenant has reasonable time to consider the change.

If you rely on market evidence, share the sources you used so the tenant understands the process. If the premises are a retail shop and the lease is silent on initiation timing for a market review, use the statutory initiation window and ensure your notice is in writing to the other party. If the lease specifies timing and mechanics, follow them precisely. 

Serve the notice in the manner the lease requires. If the lease is silent, WA’s Interpretation Act service provisions apply. Using registered post or personal delivery helps establish service dates if timing later becomes an issue.

Managing Tenant Expectations During a Commercial Rent Increase

Communication plays a key role in maintaining a positive landlord-tenant relationship. Even when the increase is modest or routine, it can still cause concern for tenants managing their own business costs.

Providing advance notice, explaining the reason for the adjustment, and discussing the method of calculation can help maintain trust.

If a tenant raises concerns about affordability or disputes the amount, consider arranging a discussion or mediation before resorting to formal proceedings. Taking a cooperative approach early can often prevent the matter from escalating and preserve the tenancy relationship.

Tips for a Smooth Rent Increase Process on Your Commercial Property

A well-managed rent increase process depends on preparation, compliance, and communication. Here are some basic tips that can assist you in this process:

• Review the lease thoroughly: Ensure your calculations are accurate, and confirm that your notice meets all legal requirements.
• Get the lease contract in writing: Avoid relying on informal conversations or assumptions, written confirmation is essential.
• Follow market trends: Stay aware of current market trends, including interest rates, inflation, and demand in your area.

Finally, seek professional advice.

Commercial leasing law in Western Australia can be complex, particularly for properties covered by the Retail Shops Act. A property lawyer can review your lease, prepare the correct notice, and ensure that all statutory obligations are met before you proceed.

Get Legal Advice Before Issuing a Rent Increase

Implementing a commercial lease increase is a normal part of managing a property investment, but it must be done lawfully and transparently. The process can differ depending on whether your lease is classified as retail or non-retail and your rent review clause.

At Lotus Legal, we provide tailored advice to landlords and property owners throughout Western Australia. Our team assists with reviewing commercial lease agreements, drafting compliant rent increase notices, and managing disputes. We ensure your rent review process aligns with both your lease and the law, protecting your investment while maintaining strong tenant relationships.

If you are planning a rent increase for your commercial property, contact Lotus Legal for clear, practical advice on the correct procedure.