Traditionally, upwards only rent reviews have been a defining feature of commercial leases. Under this model, rent could either stay the same or increase following a rent review, but the rent would never fall even where market conditions had declined. This approach offered landlords income stability and enhanced investment value.
The New Legislation
The English Devolution and Community Empowerment Act 2026 which has now received Royal Assent and is expected to take effect in 2027 introduces a significant shift – a ban on upwards only rent reviews in commercial leases and tenancies.
The ban will cover:
- all new commercial leases (whether or not they benefit from the security of tenure provisions as contained in the Landlord and Tenant Act 1954);
- renewal leases;
- reversionary leases (leases granted with a term starting in the future); and
- leases where the tenant is not in occupation of the property (i.e. superior leases where the property is sub‑let).
The ban will not apply retrospectively to leases already granted (including reversionary leases). However, any renewal lease entered into pursuant to renewal arrangements (such as options to renew, agreements for renewal leases, or put/call options) that were made on or after 17 March 2026 will fall within the scope of the ban.
Any rent review mechanism where the revised rent must go up will be prohibited. In practice, this means that commonly used rent review methods such as open market reviews, index-linked reviews, and turnover reviews will no longer be permitted if they operate on an upwards‑only basis.
The government is expected to consult further on the treatment of cap‑and‑collar rent reviews, and the outcome of that consultation is awaited.
The Practical Implications
- Any clause in a lease (which was granted before or after the Act comes into force) requiring any sub‑lease to include an upwards only rent review will be unenforceable. This may lead to inconsistencies between superior and sub‑lease rent review structures.
- Where only the landlord currently has the right to trigger a rent review, the Act will give tenants the same right, preventing landlords from initiating rent reviews solely when market conditions favour them.
- Landlords are likely to favour shorter lease terms with no rent review provisions.
- To mitigate the risk of downward rent adjustments, landlords may increasingly favour fixed or stepped rents. Index‑linked reviews may become more attractive given the historically low likelihood of negative index movements.
- Landlords may seek to inflate initial rents to offset the possibility of future reductions.
- Tenants will benefit from rents that can adjust downward during economic downturns, providing relief that was previously unavailable.
- Landlords will need to reassess long‑term income strategies, as guaranteed minimum rent levels will no longer be possible.
Conclusion
The ban on upwards only rent reviews represents a major shift in the commercial leasing sector. For landlords, it introduces new uncertainty and is likely to influence property valuations, lease negotiations, and long‑term investment strategies. For tenants, the reform is likely to be welcomed, as it ensures that rent levels more accurately reflect prevailing market conditions.
In light of the upcoming changes, both landlords and tenants should review their property portfolios, assess the potential impact of the ban, and consider how future rent structures and lease negotiations should be approached in view of these changes.
For further information or guidance, please contact BHW’s Commercial Property department on 0116 289 7000 or email info@bhwsolicitors.com.
