Understanding Rent Review Adjustment Calculations

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For North American users, please be aware that "Tenancies" are known as "Leases" and "Terms & Breaks" within a Tenancy are referred to as "Terms & Options". For more information on regional terminology, please refer to our Glossary of Regional Terminology.

This article provides an overview of how to choose the Rent Review Adjustment calculation method suitable for your needs. Whether you're dealing with a review date that falls outside of a leases/tenant's payment cycle or you want a clear understanding of how daily rates are calculated, we’ve got you covered. We will explain both the Annual and Monthly calculation methods, including real-world examples to illustrate the process.

Rent Review Calculation Methods

Rent Review adjustments ensure that rent is accurately calculated and charged when review dates do not coincide with the usual payment cycles. You can select between the Annual or Monthly methods based on your preference or lease/tenancy agreement requirements.


Configuring Your Default Calculation Method

To set your preferred default Rent Review Calculation Method:

  1. Go to the Settings tab and locate the Manage Companies option. 
  2. Select the company for which you want to set the method.
  3. Under the Invoicing drop-down menu, choose Default Rent Review Calculation Method.

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The Annual Calculation Method

The Annual method is the default setting. With this approach, the daily rental rate is calculated by dividing the annual rent by 365 days, and then multiplying this daily rate by the days the lease/tenant is charged.


Example of Annual Method

Consider the monthly rent cycle is from the 1st to the last day of each month, and suppose:

  • The annual rent is $40,000.
  • A Rent Review on the 20th of April increases the rent to $45,000.

The calculations are as follows:

1. Current rent from 01 April to 19 April:

    • Daily rent = $40,000 / 365 = $109.59
    • Pro-rata amount = $109.59 x 19 days = $2,082.21

2. New rent from 20 April to 30 April:

    • Daily rent = $45,000 / 365 = $123.29
    • Pro-rata amount = $123.29 x 11 days = $1,356.19

The lease/tenant is billed $2,082.21 for the period before the Rent Review, and $1,356.19 for the days following it.


The Monthly Calculation Method

The Monthly method takes into account the number of days in the specific month during which the Rent Review occurs. Here, the annual rent is divided by 12, followed by the total days in the month, and the result is multiplied by the number of days the lease/tenant has been charged.


Example of Monthly Method

For the same scenario provided in the Annual method example, but with an additional note that April has 30 days:

1. Current rent from 01 April to 19 April:

    • Daily rent = $40,000 / 12 / 30 = $111.11
    • Pro-rata amount = $111.11 x 19 days = $2,111.09

2. New rent from 20 April to 30 April:

    • Daily rent = $45,000 / 12 / 30 = $125.00
    • Pro-rata amount = $125.00 x 11 days = $1,375.00

The lease/tenant will be charged $2,111.09 for the days before the rent increase, and $1,375.00 for the days thereafter.


By understanding and selecting the appropriate Rent Review adjustment method, you'll ensure your lease/tenants are billed correctly, reflecting any mid-cycle rent changes.

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