Upwards-only rent reviews have historically protected landlords from market declines and protected their income streams. Conversely, they can leave tenants paying above-market rents for considerable periods. The UK Government’s English Devolution and Community Empowerment Bill, introduced in July 2025, seeks to make upwards only rent review clauses unenforceable in new commercial leases and on renewals (including statutory renewals). The proposals set out within the Bill will not be retrospective and leases granted via an Agreement for Lease completed prior to the ban will also be excluded from the legislation.
We understand that the Government’s primary driver for the legislation is to support local businesses and push growth of the High Street, yet the Bill (as drafted) will capture all commercial leases and all sizes of occupier.
The legislation will create a major and immediate shift in operations and strategy for Landlords, Investors, Developers, Lenders and Occupiers. The ban would disrupt the predictability of income streams and increase risk for investors, developers and lenders. Financial viability of projects will be hit due to the uncertainty at review, and it is likely that lenders will increase their rates to compensate. Occupiers will – on the face of it - have increased bargaining power when negotiating new leases during market downturns however the ban may result in landlords offering shorter leases, fixed stepped rents, including more landlord break options or reducing initial rent-free periods. We believe there will also be an increase in landlords seeking to link rent reviews to indexation which has historically been less likely to fall.
There remains a great deal of uncertainty surrounding the Bill. The second reading in Parliament only took place in September. A number of further amendments were introduced at Committee. These included clauses in superior leases requiring sub-leases to contain upward only rent review clauses being invalid. There is still a way to go before the legislation comes into force however we anticipate it is likely to be 2027/2028. We do not know the extent of the proposals that will be included in the final version, however, now is the time to prepare. Landlords need to review their portfolio and decide whether it is sensible to begin negotiations on renewals earlier than they typically would and also consider what approach they might take in agreeing heads of terms should the Bill come into force as drafted. Occupiers should consider whether to delay renewals or acquisitions (where possible) until further clarity is established.
Until we see the final wording, it is not possible to suggest the best structure or mechanism for future rent reviews, but we will continue to monitor the Bill’s progress.