Abolition of upward-only rent reviews: Commercial context

The English Devolution and Community Empowerment Bill proposes a statutory ban on upward‑only rent review (UORR) clauses in new and renewal business tenancies across England and Wales.

UORRs have long been a standard feature of commercial leases, ensuring that rent can only stay the same or increase at review points, typically every five years, even where the open market rent has fallen.

UORRs offer landlords and investors certainty, but have been criticised for contributing to market inefficiencies – artificially inflating commercial rents and impeding the sustainability of small businesses during economic downturns.

With market self‑regulation through voluntary codes of practice not meaningfully reducing reliance on UORRs in recent years, the government now considers legislative intervention necessary.

The policy rationale for the ban is tied to the Bill’s wider objective of empowering local communities and regenerating high streets. The government has expressed particular concern that UORRs hinder the viability of independent retail and hospitality businesses, many of which struggle to absorb rising rents during challenging economic conditions. By allowing rents to fall as well as rise, the government hopes to make town centres more dynamic and reduce long‑term vacancy.

However, market commentators have questioned whether UORRs are the true cause of high street decline, pointing instead to business rates, structural shifts toward online retail and broader economic pressures. Concerns have also been raised about the lack of prior consultation, which created uncertainty in investment markets when the ban was first announced.

What are the proposals?

Under the Bill, UORRs would be unenforceable in any business tenancy granted after the relevant provisions come into force, as well as in renewal leases, including statutory renewals under the Landlord and Tenant Act 1954.

The legislation doesn’t generally operate retrospectively, so existing leases containing UORRs will remain valid.

However, there’s a limited retrospective effect on existing superior leases so, where a superior landlord currently has the power to compel a sub‑tenant to accept a UORR, the Bill modifies the superior lease so that a non‑upward‑only rent review must be permitted in the sub‑tenancy. This creates the possibility of a mismatch between the rent mechanics of pre‑ban headleases and post‑ban subleases, which the sector has flagged as a source of concern.

The mechanism of the proposed ban is deliberately broad. A lease will fall within the prohibition if it contains “relevant rent review terms”, meaning any type of review where the revised rent is not ascertainable at the date of grant. This includes open market rent reviews, index‑linked reviews, turnover‑linked rents, and any clause using a multiplier or index to generate a rent figure that might differ from the passing rent.

The legislation requires rent at review to be set at a “reference amount”, which is typically the figure produced by the relevant indexation or calculation. If a review mechanism would have produced a rent higher or lower than the reference amount, the clause is overridden and the reference amount must be substituted. As a result, rent may lawfully move both up and down, and any clause seeking to prevent a downward adjustment becomes void.

The proposed legislation also enables tenants to trigger rent reviews in circumstances where leases currently reserve that power to landlords.

The Bill contains comprehensive anti‑avoidance provisions to prevent landlords structuring arrangements that would replicate the effect of an upward‑only review. These provisions expressly capture put options, call options, and agreements for lease that would force tenants into new tenancies with upward‑only mechanisms. The draft published on 30 October 2025 significantly expanded the scope of these anti‑avoidance measures, including by prohibiting call options in addition to put options and by clarifying that tenants who are not in actual occupation are protected, thereby closing a gap that previously risked excluding headlease tenants from the regime.

How will a ban on upward-only rent reviews affect commercial landlords and tenants?

The impact of the proposed ban on upward-only rent reviews will be significant.

Tenants stand to benefit from rent movements that track market and economic conditions, reducing the risk of being locked into above‑market rents during downturns. And the fact tenants will be able to trigger rent reviews in circumstances where leases currently reserve that power to landlords, should prevent landlords delaying reviews in falling markets to avoid rent reductions.

For landlords, the ban removes a longstanding valuation assumption and may destabilise projected rental income streams. This is especially problematic for long‑term investors such as pension funds, which hold substantial commercial property assets whose value and financing structures often rely on the predictability afforded by UORRs.

In response, landlords are already considering alternative rent structures that remain permissible under the Bill. Fixed stepped rents, where increases are agreed at the outset and therefore fall outside the prohibition, are expected to become more common. Pure indexation mechanisms may also continue to be used, provided they don’t create a dual‑element structure that triggers the ban. Landlords may also seek to mitigate risk by setting higher initial rents, negotiating shorter lease terms, incorporating more break rights, or contracting out of security of tenure to allow market‑reset leases more frequently. Each of these approaches, however, brings its own commercial challenges.

From a market perspective, the reforms have the potential to create a two‑tier system. Existing leases with upward‑only reviews may become more valuable to landlords and investors than new or renewed leases that permit downward rent movements, potentially complicating future transactions, valuations and lending arrangements. Lenders may reassess their risk models, as the predictable upward‑only rental streams previously used to support borrowing will no longer be available in new deals.

What’s the likely timescale?

The Bill has progressed quickly through Parliament. It completed the Committee and Report stages in the House of Commons in late 2025 without substantive changes to the UORR provisions. The Bill received its first reading in the House of Lords in November 2025 and is now at Committee Stage in the Lords. Further technical amendment is expected, but the core policy direction appears politically stable. Given the Bill’s broad scope and complexity, it is unlikely that the new regime will take effect before late 2026 or 2027 (or even later).

And did you know?

Another key, but lesser-known, aspect of the English Devolution and Community Empowerment Bill is its proposals to extend the assets of community value (ACV) regime, empowering communities to protect valued local spaces from development. For information and advice about proposed ACV reforms, see our recent briefing.

Abolition of upward-only rent reviews: How we can help you

Our Real Estate transactional and litigation specialists are experienced and expert in all aspects of negotiating, resolving and documenting commercial rent review deals – and with the unique insights that come from regularly acting both investor/landlord- and tenant-side.

Whether in relation to pre-emptive, strategic portfolio management, property/deal-specific transactional negotiation, the provision of staff training, or in relation to the management and resolution of rent review disputes, we can provide tailored, commercial advice and assistance.