Upwards-only rent review clauses have been a standard feature of commercial leases in England and Wales, giving landlords certainty that rental income will never fall below the passing rent on review. New legislation is set to change that, with significant implications for how landlords, tenants, investors, and lenders approach commercial property transactions.
The English Devolution and Community Empowerment Act 2026, which received Royal Assent in April 2026, will prohibit upwards-only rent reviews in new and renewal commercial leases once in force – a shift that could reshape lease negotiations and create a more balanced framework between landlords and tenants.
What is an upwards-only rent review?
An upwards-only rent review clause (UORR) provides that, at each rent review date, the rent can be adjusted to the current market level – but only upwards. If market rents have fallen, the tenant continues to pay the existing rent. This has historically provided landlords and their funders with income security, supporting investment values in commercial property. However, critics argue that UORRs lock tenants into paying above-market rents during downturns.
Implications of the ban
The Act amends the Landlord and Tenant Act 1954 to prohibit UORRs in business tenancies. In effect, once in force, rent review clauses must allow for the possibility of rent going down as well as up – with any provision that prevents this being invalidated.
The ban applies to all commercial leases, whether inside or outside the security of tenure provisions of the 1954 Act. Its reach is therefore wider than many initially expected. However, the ban is not yet in force, with commencement expected around the end of 2027.
The British Property Federation (now Real Estate UK) raised concerns about the potential impact on investor confidence, particularly in sectors such as offices, logistics, and data centres, where longer leases and UORRs have traditionally been standard.
Key dates and transitional arrangements
The ban is not retrospective, with leases granted before commencement continuing under their existing terms, but all new leases granted after commencement will be caught.
However, parties should not assume that existing arrangements are entirely unaffected. To prevent circumvention through renewal options, any lease granted pursuant to a tenancy renewal arrangement (broadly defined to capture any arrangements under which an existing tenant may obtain a new lease, including options) entered on or after 17 March 2026 will be subject to the ban – even if the renewal is granted before commencement. Agreements for lease with new tenants are treated differently: provided the agreement is entered into before commencement, the lease granted under it will not be caught. There is no longstop date for completion of such agreements, so in principle a lease could be granted well after commencement and still benefit from the exemption.
Note: there is some uncertainty in the drafting as to whether a renewal lease granted before commencement under such an arrangement would also be caught.
Pre-17 March 2026: Leases, options and agreements to renew are not subject to the ban.
17 March 2026 onwards: Options and agreements to renew existing leases will be subject to the ban. Leases granted in this period are not subject to the ban.
Commencement date onwards: New leases are subject to the ban.
Alternatives to UORRs
The ban may not be as far-reaching as first appears. It targets only rent review mechanisms that operate on an upwards-only basis. The following arrangements remain permitted:
Stepped rents – where the rent increases by fixed amounts at specified dates, as determined at the outset of the lease;
Index-linked rents – reviews tied to an index such as RPI, which allow for the possibility of downward movement;
Open market rent reviews – where the review mechanism allows rent to move up or down to reflect current market conditions; and
Turnover rents – base rents that adjust by reference to the tenant’s trading performance.
Anti-avoidance provisions
The legislation includes anti-avoidance provisions. Any clause requiring a tenant to pay the difference between the rent that would have been payable under a UORR, and the lower reviewed rent will be void.
Tenants will also be able to initiate the rent review process themselves, regardless of the terms of the lease. This prevents landlords from simply declining to trigger a review in a falling market.
Practical considerations
Looking ahead, landlords and tenants will need to consider how the ban might affect their leasing strategies:
Alternative lease structures. Landlords should consider alternative rent review structures that provide income certainty or seek to offset the loss of upwards-only protection through higher initial rents or more cautious tenant incentives.
Subleases. There is no carve-out for subleases, and any headlease provisions requiring UORRs will be of no effect from commencement. Tenants with pre-ban headleases who grant subleases after commencement may face exposure if market rents fall — paying a fixed rent under the headlease while receiving a reduced rent from their subtenant.
Lease length. Landlords may prefer to adopt shorter lease terms to reduce exposure to rent review risk – a shift that could have wider implications for investment decisions.
Lending considerations. The removal of the income certainty provided by UORRs may lead to more conservative lending assumptions, potentially affecting the terms on which finance is available for commercial property investment.
A two-tier market? When Ireland introduced a similar ban in 2010 (under the Land and Conveyancing Law Reform Act 2009), the market saw a distinction in how pre-ban and post-ban leases were valued. A similar differentiation could emerge here, with investors placing a premium on pre-ban leases for their guaranteed income security.
Increased rent review activity. Where tenants can trigger rent reviews, there may be greater willingness to seek reviews in a falling market. Landlords and tenants should ensure that their leases contain clear procedural provisions for the conduct of reviews.
What’s next?
Prior to commencement, the Government has committed to consulting with the industry on aspects such as the use of caps and collars. A "collar" sets a minimum rent floor below which the rent cannot fall on review, while a "cap" sets a maximum ceiling above which it cannot rise. If permitted, these mechanisms could offer landlords a degree of downside protection while still allowing rents to move in both directions – a potential middle ground between the current upwards-only model and a fully open market review. This consultation is expected to take place in 2027.
What should you do now?
While the ban represents a significant shift, its practical impact may be less dramatic than some commentators suggest. Landlords have always had tools to manage income risk such as stepped rents, longer rent-free periods, and careful tenant selection, and these will become more important. We expect the market to adapt, but the transition will require careful planning, particularly for those holding pre-ban headleases with subletting exposure. We recommend that you:
Audit your leasing strategy. Review how existing arrangements and future lettings may be affected by the ban, and whether alternative rent review structures might be appropriate.
Monitor renewal options. Any options or agreements to renew entered since 17 March 2026 will be subject to the ban, regardless of when the legislation comes into force.
Assess subletting exposure. If you hold a headlease with a UORR and are granting or may grant subleases after commencement, consider how a potential mismatch between headlease and sublease rent review provisions could affect your position.
Update precedent documents. Review standard lease forms to ensure they will be fit for purpose when the ban comes into force.
Engage with the consultation. The Government will consult with the industry before the ban takes effect. Use this opportunity to contribute to the policy discussion.
Our Real Estate team regularly advises landlords, tenants, investors, and lenders on commercial leasing matters. If you would like to discuss how the ban may affect your portfolio or leasing arrangements, please contact Nick Wood or any member of the team.
