Upwards only rent reviews outlawed: what this means for commercial property

Upwards only rent reviews have been a bedrock of commercial leasing in England and Wales for decades, underpinning valuations, funding models and investment strategies.

The English Devolution and Community Empowerment Act (the Act) received Royal Assent on 29 April 2026 and contains provisions prohibiting upwards only rent review mechanisms in commercial leases in England and Wales. The surprise proposal was first made in summer 2025, however recent amendments have sharpened its commercial impact.

Landlords, tenants, investors and lenders will need to assess current transactions and long-term investment strategies in light of the Act.

What has changed in the drafting of the Act and why it matters?

The Act will make any upwards only element in rent review clauses unenforceable where the reviewed rent is not fixed or fully ascertainable at the outset of the lease term. In practice this captures the most commonly used review mechanisms - open market, index‑linked and turnover rents - and converts them into two‑way reviews, allowing rents to move down as well as up.

The key changes incorporated into the Act since our previous article of 28 July 2025 are:

1. Who is caught: All “business tenancies” within (or capable of falling within) the Landlord and Tenant Act 1954, whether or not the tenant is in physical occupation of the premises. This means that superior leases where the superior tenant does not occupy would now be caught by the regime.
2. Sub-tenancy provisions: Subletting clauses in existing leases (being those granted before the ban comes into effect) which require a sublease granted by a tenant to include upwards only rent review provisions will be void. This will allow tenants to sublet without breaching the ban but could also create a disparity between rent review provisions in existing superior leases and leases.
3. When it applies to new leases: The date of implementation of these provisions is currently unknown.
4. When it applies to renewal leases: Following approval of an amendment proposed by Baroness Taylor, any renewal lease entered into pursuant to a lease granted on or after 17 March 2026 appears to be caught by the Act. This includes a renewal lease granted under a put or call option contained in the original lease or granted in a separate option agreement. This means that the initial rent payable under the renewal lease (and later reviews) could be capped by the review mechanism, even if that produces a lower figure than the then passing rent under the original lease. So, whilst the provisions are not intended to be retrospective and existing lease terms are generally preserved, these provisions could kick in much earlier than anticipated where renewal rights are exercised. This has elevated the Act from a future looking reform to an immediate transactional issue for lease negotiations taking place now and could lead to the inclusion of final day rent reviews in new leases in an attempt to circumvent this issue.

Practical implications for the real estate sector

Landlords, investors and lenders

For landlords and investors, the ban strikes at income stream certainty:

• Valuations and funding: There may be a negative impact on yield assumptions and debt service coverage calculations, leading to changes in the requirements of lenders and asset management strategies.
• Income structuring: Landlords may demand higher day‑one rents to safeguard against market downturns and may offer fewer incentives to tenants (i.e. rent free periods and capital contributions) to reduce their initial outlay.
• Portfolio inconsistencies: As mentioned above there could be a disparity between rent review provisions in superior leases and subleases.

Tenants and occupiers

For tenants, the change is generally positive but not cost‑free:

• Downward market protection: Rents can adjust to reflect falling markets, reducing the risk of tenants being locked into overrented premises during economic downturns. Tenants would also receive a right to actively trigger rent reviews to enforce the rent review provisions of the lease. However in prime properties landlords may insist on index linked increases, which could be less favourable to a tenant than an open market review.
• Lease structuring: Landlords may prefer shorter three to five year leases with break rights to give them flexibility but this could be less than ideal for tenants looking for certainty and incurring high fit out costs.

Key points to consider

1. Live negotiations may need reconsideration: Any lease being entered into now that includes options to renew should be considered carefully. Tenants in a strong bargaining position may also wish to push for rent review provisions in new leases to reflect the Act to avoid any uncertainty over interpretation in the future.
2. Agreements for lease: Timing and structure may determine whether a transaction falls inside or outside the new regime, depending on the implementation date of the Act.
3. Planning for the future: Investors and landlords should be focusing on long term rent income modelling for their portfolios and considering the best way to structure rents in the future. Fixed stepped rent increases agreed at the outset (which remain permitted), shorter unprotected leases and more frequent re‑gearing are likely to gain traction.

Uncertainty remains

Although the Act has been passed by Parliament, the timing of commencement of the ban on upwards only rent reviews in new leases has not been specified. The government’s initial impact assessment suggests implementation in the 2027/28 window but this is not fixed.

The government has also committed to consult on the use of caps and collars. Whilst this is welcome this may further affect the timing of the new regime coming into force.

Given the potential for further changes to the Act, real care should be taken in pre-emptively drafting to accommodate these unimplemented provisions.