Upwards-only rent reviews have been a standard feature of commercial leases in England and Wales for decades, giving landlords certainty that rents could never fall — even in difficult market conditions.
That is about to change.
The English Devolution and Community Empowerment Act introduces a ban on upwards-only rent reviews in commercial leases, applying to new leases which are or could be occupied by the tenant for business purposes. While the reforms are not yet in force, landlords and tenants should begin preparing now.
What are the changes?
Under the new legislation, upwards-only rent review clauses in business tenancies (which provide that a rent will either increase or stay the same as the existing rent on review) will become unenforceable in many circumstances. Rents reviewed during a lease term will be able to move in either direction, depending on market conditions.
The ban is expected to apply to open market rent reviews, index-linked reviews and turnover-based rent reviews. Landlords will no longer be able to assume rents will always rise over the course of a lease.
One important exception is that the legislation does not affect fixed or stepped rent increases agreed at the outset of a lease, which are expected to remain lawful.
When will the changes apply?
The Act has received Royal Assent, although implementation is not anticipated until 2027 at the earliest, with no confirmed date announced as yet.
Despite this, aspects of the reforms will require immediate consideration, as agreements containing an option to enter into a renewal lease entered into on or after 17 March 2026 will also be affected by the ban. As the act will have retrospective effect in this regard, transactions being negotiated today can therefore already be covered by the changes introduced.
What about subleases?
One of the more significant aspects of the Act concerns subletting arrangements. While existing leases granted before the ban takes effect may still contain upwards-only rent review clauses, any requirement within those leases compelling a subtenant to adopt the same terms will become void for subleases granted after it is implemented.
Following implementation, a tenant under a headlease would be required to continue to pay rent under an upwards-only structure, while being unable to mirror those terms in any newly granted sublease — potentially receiving less rental income from their subtenant than they themselves owe under the headlease.
What should landlords and tenants be doing now?
Landlords should be aware of how future rent structures will work, and going forward should consider whether higher initial rents or shorter lease terms better protect their position. The impact on investment value and lending arrangements also warrants early assessment.
Tenants should audit any ongoing negotiations involving renewal rights and consider whether proposed lease terms adequately reflect future market conditions. Any lease being negotiated should be carefully reviewed. Poorly drafted clauses risk being overridden by the legislation, potentially leading to disputes or unintended outcomes.
How we can help
Our commercial property team can review your existing lease arrangements in the context of these significant changes, assess risks linked to renewal options and subleases, and ensure your agreements are structured to remain compliant as the new law comes into effect. We will keep you informed of any further developments that may affect you.
If you need further advice or support on upwards-only rent reviews, get in touch.