It’s all going down with rent review

In an unexpected move, the government has unveiled draft legislation which would ban upwards-only rent reviews in commercial leases in England and Wales. The measures are contained in the draft English Devolution and Community Empowerment Bill, which was introduced to Parliament on 10 July 2025.

The aim

According to the related government guidance, “the ban aims to make commercial leasing fairer for tenants, ensure high street rents are set more efficiently, and stimulate economic growth”. Whilst occupational tenants will welcome the proposals, they will be met with disquiet by investors and lenders who prefer stability and for a property asset’s minimum income to be predictable. 

The detail

• The proposed legislation prohibits upwards only rent review clauses in new tenancies. Existing leases are unaffected, but renewal leases (statutory or agreed) are caught. Leases entered into pursuant to pre-commencement agreements for lease are outside of the reforms.
• The reforms apply to business tenancies as defined by the Landlord and Tenant Act 1954 (“the 1954 Act”) across all asset types.
• The proposals will apply to open market rents, index-linked rents and turnover based rents, where the lease drafting prevents the rent from falling. Fixed rental increases are not caught. Upwards only reviews will be ineffective and instead the legislation would intervene so that e.g. in the case of a purported upwards only market rent review, the revised rent would be the open market rent, even if lower than the passing rent.
• Tenants will be able to trigger rent reviews even if the lease only enables landlord to initiate the process. This would prevent landlords resting on higher rents in a falling market.
• Put options which require tenants to take leases at a rent set in a way which would be contrary to the draft legislation would also be prohibited.

The impact

The ban on upwards only rent reviews would apply to business tenancies as defined by the 1954 Act, meaning that it would only apply to leases where a tenant is occupying for the purposes of a business. This would appear to give rise to a possible situation where upwards only rent reviews are effective in headleases and intermediate leases, but not in occupational leases. This could lead to income gaps for those higher up the lease chain.

There will no doubt be an impact for investors and lenders, who will need to adjust valuation methods to take into account more variable income streams. Fixed rental increases may become more common, and it is possible that landlords will increasingly favour shorter lease terms and contracted out leases, removing the need for a rent review entirely.

What’s next?

It is early days. The draft bill will need to proceed through the parliamentary process over the coming months and may be subject to significant amendments or even be abandoned. The real estate market will be watching with interest.