Reduced Rent and Stepped Rent Under FRS 102

Rent is not always one flat figure for the whole term. Leases commonly start on a reduced rent, include a rent-free period, or step up on pre-agreed review dates. Lease102 records the rent's level over time as a rent timeline: dated periods, each with the rent per year the lease states, from which the payment schedule and the lease liability are built.

Reduced Rent Is Not Rent-Free

A reduced rent period still has rent payable, at the stated lower rate. Treating it as rent-free removes real payments from the schedule and understates the lease liability. Lease102 prices a reduced period at exactly the figure the lease states, and reserves rent-free treatment for periods in which nothing is payable.

Example: A Reduced Opening Rent

Lease term: 24 May 2026 to 23 May 2029 Rent: £18,500 per year Reduced period: 24 May to 23 Sep 2026 at £9,250 per year Rent timeline: 24 May 2026 - 23 Sep 2026 £9,250 p.a. (£770.83 per month) 24 Sep 2026 - 23 May 2029 £18,500 p.a. (£1,541.67 per month)

What Goes in the Timeline

Each row is a period of the term with the rent per year the lease states for it:

FRS 102 Reference: FRS 102.20.51(a)

Open-Market and Index-Linked Reviews

A review that will be settled later (open market, RPI, CPI) is not a pre-agreed amount, so it does not belong in the timeline, and Lease102 never computes future levels for one. FRS 102 measures a payment that depends on an index or a rate at the rate in force at the commencement date, without assuming future changes, and remeasures the liability when the change takes effect. The timeline keeps the last fixed rate; an imported document with such a clause raises a note on the review screen naming the clause and the first review date, so you know it is there. When the review is settled, record the new rent as a lease modification.

Reduced or Half Rent

A period at a stated lower rate, common at the start of a renewal or as a concession.

Rent-Free Periods

A period at zero. The months still sit inside the lease term; they simply carry no payment.

Pre-Agreed Fixed Uplifts

Stepped rents fixed in the lease, such as a 3% uplift on each anniversary. These are lease payments and are included in the liability from day one. When you import a document, you do not have to work the levels out: Lease102 reads the clause and computes the rate for each review date, compounding on the rent then payable unless the lease says the uplift applies to the original rent. Computed rows are marked as such on the review screen, with the clause they came from, and you can edit them like any other row.

How the Payment Schedule Is Built

Each instalment is the rate in force divided by the instalments per year. A month in which the rate changes part-way is day-weighted between the outgoing and incoming rates, so the schedule follows the lease to the day rather than to the nearest whole month.

A Blended Month

Rate changes on 24 September: 1 - 23 Sep at £9,250 p.a. + 24 - 30 Sep at £18,500 p.a. September instalment: £950.69

Reviewing and Editing the Timeline

AI extraction reads the timeline from the document and shows it on the import review screen for checking against the source, clause by clause. After approval it appears on the lease page above the payment schedule, and can be edited on the lease form: the rows must cover the whole term with no gaps, amounts are per year excluding VAT, and each row shows what its rate works out at per instalment. Saving rebuilds the payment schedule from the rows.

The Headline Rent Is a Summary

On a lease with a timeline, the single rent figure shown in lists is the rate in force today. The timeline, not that figure, is what builds the schedule, so changing the rent means editing the timeline rows.

Moving a Timeline Lease onto Quarter Days

A lease whose rent comes from a timeline can be moved onto a Quarter Day calendar from the lease form: set the frequency to Quarterly, choose the calendar (English, Scottish, Calendar or Irish), and pick how each instalment is priced. Saving rebuilds the schedule from the timeline rows onto the calendar's own payment dates, with the broken first and final periods pro-rated by day count and any quarter containing a rent change day-weighted between the two rates.

Converting Back

Clearing the calendar rebuilds the schedule from the timeline on ordinary calendar periods again. Either way the change is recalculated and recorded in the audit trail.

Equal Instalments

Each full quarter is a quarter of the annual rent, which is how UK commercial leases conventionally pay. This is the default.

Day-Count Share

Each quarter is charged its actual share of days at the annual rate, for leases whose wording apportions rent daily. Quarter Day intervals are irregular (87 to 97 days), so instalments differ quarter to quarter on this basis.

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