Upwards only rent reviews to be banned in 2027/28?

  • Étude de marché 28 juillet 2025 28 juillet 2025
  • Royaume-Uni et Europe

  • Réformes réglementaires

  • Droit immobilier

The UK Government took the property industry by surprise when it published draft legislation to ban upwards only rent review clauses in commercial leases. The relevant wording is found towards the end of the lengthy English Devolution and Community Empowerment Bill, legislation which primarily deals with the unrelated topic of local government reform.

This proposed ban has generated much discussion and debate, but with Parliament now in summer recess, we will have to wait until the Autumn for further details. In this article, we explain what we know so far and highlight the potential issues that landlords and tenants should now be considering.

Why now?

Upwards only rent review clauses have been the subject of discussion for many years. The Labour Government considered this back in 2001, but subsequently dropped plans to legislate, referring to the trend towards shorter leases - a point which still applies today. A private member’s bill on the topic was introduced in 2021 but did not get very far.  The latest announcement is significant because this is a government bill, which means that it is more likely to progress. At this stage the timing is unclear, but the accompanying impact assessment refers to implementation being scheduled for 2027/28 (see pages 231 and 233).

The government claims that upwards only rent reviews “pit landlords against businesses and can make rents unaffordable and cause shops to shut”. The provisions are clearly intended to support small retail businesses and tackle the issue of vacant high streets, but the ban will apply to all types of commercial property, which may have unintended consequences. 

This Bill was introduced without any prior consultation or warning, which has caused considerable frustration to many in the property sector. Upwards only rent reviews are a longstanding feature of commercial leasing arrangements in England and concerns have been raised that that such a significant change could damage investor confidence and impact future investment in the sector. However, the overall reaction has been mixed, and the government will be urged to engage with voices from both sides before finalising any new law.

How will the legislation work?

  • The legislation is not retrospective and so, when in force, it will not affect existing leases (nor leases entered into pursuant to pre-existing agreements). 
  • Renewal leases will be caught by the ban.
  • The ban will apply to all new commercial leases that fall within Part II of the Landlord and Tenant Act 1954. This simply means that the ban will cover all new leases where the tenant occupies for the purposes of its business (regardless of whether or not the lease benefits from security of tenure under the 1954 Act).  
  • As currently drafted, the reference to occupation means that headleases and intermediate leases will not be caught by the ban (potentially leaving those landlords with an income gap if the occupational tenant’s rent decreases when reviewed). 
  • The ban will apply to upwards-only rent reviews including open market, index-linked, geared rents and turnover-based reviews. These types of review will still be permitted but only on the basis that the rent can move either up or down on review. 
  • A clause stating that the reviewed rent will be the higher of (i) market rent and (ii) an indexed-linked rent will be permitted. This is because the rent could decrease if either of those figures turned out to be below the passing rent. 
  • Stepped increases (where the future rent is known at the start of the lease) will still be permitted.

The Bill includes wide ranging anti-avoidance provisions and parties cannot contract out of the ban (even if both parties agree to upwards only reviews in principle). However, there is a power to introduce regulations setting out exceptions to the ban. The explanatory notes suggest that such exceptions could include allowing caps and collars to be used in certain (as yet unspecified) circumstances. 

Comment

It is not clear that the proposed ban will help those that it is seeking to assist – many retail and hospitality leases are for shorter terms and so do not contain a rent review clause. Indeed, the Regulatory Policy Committee highlighted that the government’s evidence on this point “indicates it is largely a historical problem”.  

The potential consequential effects need to be considered further, with the government’s own impact assessment noting that the ban may “may result in investors becoming less willing to invest in the UK as they are no longer guaranteed an increasing cash-flow over time”.  Although introduced under different economic circumstances, Ireland offers a useful example, having banned upwards only rent reviews in 2010. There was some short-term volatility but the ban did not have a significant impact over the longer term and commercial investment stabilised as the market adapted. 

The second reading of the Bill is scheduled for 2 September 2025 but there is a long way to go before any ban on upwards only reviews actually becomes law.  For further Insights from our real estate team see our UK Real Estate Hub.

Fin

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Auteurs supplémentaires:

Laura Sheftel and Ben Eustace

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