The government’s proposed ban on upwards-only rent reviews marks a significant change for the commercial property market in England and Wales.
For many years, upwards-only rent review clauses have been a familiar feature of commercial leases, particularly longer leases of retail, office and industrial premises. That position is now set to change. The English Devolution and Community Empowerment Act 2026 (“the Act”) has received Royal Assent and includes provisions which will ban upwards-only rent review clauses in both new and renewal commercial leases once the relevant provisions are brought into force.
What is an upwards-only rent review?
A rent review clause allows the rent under a commercial lease to be reviewed at specified intervals, often every three or five years. An upwards-only rent review means that, following the review, the rent can only increase or remain the same.
It cannot decrease, even if the open market rental value of the premises has fallen.
This has long been seen by landlords and investors as providing certainty of income. However, tenants have argued that these clauses can leave businesses paying above-market rents, particularly during economic downturns or where local trading conditions have weakened.
What is changing?
The Act introduces a statutory ban on upwards-only rent review clauses in commercial leases in England and Wales. The Government has described the reform as a measure intended to prevent businesses’ rents being locked at artificially high levels where market rents have fallen.
Although the Act is now law, the ban is not yet itself in force. The relevant provisions will need to be brought into force by commencement regulations. Until that happens, existing law continues to apply. Several legal commentators expect implementation to follow later, potentially in 2027 or 2028, although the precise timing remains to be confirmed.
Which leases will be affected?
The ban is expected to apply to new commercial leases and renewal leases granted after the relevant provisions come into force. It will not generally rewrite existing leases that are already in place.
The Government has stated that the ban will apply to upwards-only rent review clauses in new and renewal commercial leases. This means the reform is likely to be particularly relevant where landlords are:
negotiating a new lease;
agreeing heads of terms;
documenting an agreement for lease;
negotiating a lease renewal under the Landlord and Tenant Act 1954; or
restructuring existing lease arrangements.
Care will be needed where deals are being negotiated now but may complete after the ban comes into force. Transitional provisions and commencement regulations will be important in determining whether particular arrangements are caught.
Will existing leases be affected?
In broad terms, existing leases are not expected to be automatically changed simply because the Act has received Royal Assent. However, landlords should be cautious. Renewal arrangements, options and agreements entered into before the ban comes into force may still require careful review. Some commentary has highlighted a retrospective element in relation to certain renewal arrangements made on or after 17 March 2026, meaning parties should take advice before assuming that a transaction is outside the new regime.
What types of rent review clauses could be caught?
The ban is aimed at clauses which prevent rent from decreasing on review. That may include traditional open market rent reviews where the reviewed rent is expressed to be the higher of the existing rent and the open market rent.
It may also affect other mechanisms if they operate in a way that prevents rent from falling. For example, index-linked rent reviews with collars, certain turnover rent structures, or formula-based reviews may need to be reviewed carefully if they produce an upwards-only effect. Legal analysis has also noted that fixed or stepped rents, where the increases are agreed at the outset rather than determined by a future review mechanism, may be treated differently. The wording of the lease will be critical.
What does this mean for landlords?
For landlords, the ban may affect valuation, investment modelling and funding assumptions. Upwards-only reviews have historically provided certainty of rental growth or rental stability, which are vital for investment property.
Landlords may now wish to consider:
whether fixed stepped rents are commercially appropriate;
whether shorter lease terms should be used;
whether rent deposits, guarantees or other security should be reviewed;
how open market reviews should be drafted once the ban is in force;
the impact on portfolio valuations and lender requirements; and
whether existing heads of terms or agreements for lease should be revisited.
Landlords should also be careful not to assume that alternative drafting will avoid the legislation. Anti-avoidance provisions and the detailed wording of the Act and commencement regulations will need to be considered.
What can landlords do now?
Although the ban is not yet in force, it is already relevant to lease negotiations. A landlord should consider the issue at heads of terms stage and avoid leaving rent review drafting until the end of the transaction.
Landlords should review:
current lease negotiations;
renewal discussions;
agreements for lease;
options to renew;
portfolio standard form leases; and
funding or investment assumptions based on upwards-only rental growth.
Where a transaction is due to complete after commencement, the drafting will need to comply with the new rules. Where arrangements are being put in place before commencement, advice should be taken on whether transitional provisions may apply.
Conclusion
The ban on upwards-only rent reviews represents one of the most significant changes to commercial lease drafting in many years. And for landlords, it may require a rethink of rental structures, valuation assumptions and risk allocation.
The key point is that this is no longer simply a policy proposal. The legislation has received Royal Assent, but the detailed timing and practical effect of implementation will depend on commencement regulations and the final form of any transitional provisions.
Landlords, tenants, investors and lenders should take advice before entering into new lease arrangements, renewing existing leases or relying on upwards-only rent review wording.
If you are negotiating a new commercial lease, renewing an existing lease or reviewing your property portfolio, our Commercial Property team can advise on the implications of the proposed ban and help ensure your lease documentation is fit for purpose.
