In an unexpected move over the summer, the government introduced draft legislation to ban upwards-only rent reviews in commercial leases across England and Wales. 

The measures are contained in the draft English Devolution and Community Empowerment Bill.  The Bill is primarily intended to implement the government’s proposal to devolve power more widely in England and foster high street revival. However, hidden in the closing pages of the Bill is the surprise proposal to ban upwards-only rent reviews for all new commercial leases (regardless of sector), which was introduced without Real Estate industry consultation.  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”. 

If enacted, a prohibition on upwards only rent reviews would mark a significant shift in the English commercial leasing landscape.  With the Bill now through the House of Commons and having had its second reading in the House of Lords on 8 December, it continues to edge closer to the statute book.

This briefing note examines the detail of the Bill, its potential impact on the Real Estate sector, and outlines practical steps clients may wish to consider in preparation for the proposed ban. 

Key Changes Explained

Prospective Impact Only: The proposed legislation prohibits upwards only rent review clauses in new tenancies, including renewal leases (whether statutory or agreed) and put options which require tenants to take new leases at the end of the term.  Existing leases remain unaffected as do leases entered into pursuant to pre-commencement agreements for lease. 

Broad Application: The proposals will apply to open market rents, index-linked rents and turnover based rents, where the lease drafting prevents the rent from falling.  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. Fixed rental increases are not caught. 

All Asset Types Included: The reforms apply to business tenancies as defined by the Landlord and Tenant Act 1954 (“1954 Act”) across all asset types.  The proposed reforms are not limited to retail leases despite this class of lease being the focus of the government’s intention. 

Greater Control for Occupiers: 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.

Sublettings: If existing leases (or agreements for leases) include provisions which require a tenant to include upwards-only rent reviews in any sub-lettings, these will not be effective once the new legislation is in force.   A superior landlord will not be able to require a tenant to grant a sub-lease which would breach the ban.   This might mean that superior landlords become more reluctant to consent to sub-lettings and questions will inevitably arise as to whether this could be considered a reasonable ground for a superior landlord to refuse consent to subletting.  Landlords of existing leases are likely to object to losing an element of control which has already been negotiated into an existing lease.

What this means for Tenants and Landlords

For occupiers, the proposals promise rent reviews that align with market conditions, reducing the risk of being locked into inflated rents during downturns, and greater flexibility. Whilst occupational tenants may initially welcome the proposals, they will be met with disquiet by investors and lenders who rely on stability and for a property asset’s minimum income to be predictable.  Landlords will need to adjust their valuation methods to consider more variable income streams and the ban will certainly impact on asset valuations, loan terms and funding models.  The British Property Federation warns that the legislation “risks investor confidence at a time when development viability is already seriously challenged." 

In the short term, as enactment approaches, landlords might wish to consider accelerating transactions by granting reversionary leases and entering into agreements for lease with new tenants.  As the proposed ban will not have retrospective effect, any leases completed before implementation that contain upwards-only rent review provisions will remain unaffected.  Similarly, leases completed after the reforms can still include upwards only rent reviews if they are executed under pre‑existing agreements for lease.  This incentivises landlords to move quickly to secure upwards-only rent reviews before the legislation comes into force. 

Similarly, occupiers should review upcoming lease negotiations and consider timing strategies to maximise the benefits from the proposed reform. Tenants may be able to leverage a landlord’s urgency to complete deals before the potential ban to negotiate additional lease incentives.  However, they should weigh these benefits against the risks of agreeing an upwards only rent review – such as being burdened with an over rented premises during an economic downturn or facing difficulties assigning these leases later, if necessary. Alternatively, tenants might consider delaying negotiations until the reforms are enacted.  Timing will be everything. 

In the longer-term, fixed rental increases may become more common, and it is possible that landlords will increasingly favour shorter contracted out lease terms, removing the need for a rent review entirely.  Landlords may set higher initial rents, reduce incentives, and incorporate break clauses or turnover based rents to seek to mitigate the risks. 

The real test for the legislation will only come when market conditions shift – revealing whether tenants have truly benefitted from this reform or encounter challenges as its long‑term consequences unfold. 

Will the Proposals Really Make It to Law?

Given the significant implications of these changes and the absence of industry consultation, it’s natural to question whether the proposals will actually become law.  The Real Estate sector holds considerable influence, with trade bodies and investors actively lobbying through formal representations, media engagement, and parliamentary outreach.  However, their position is constrained by the government’s wider political agenda and the legislative momentum behind high street revival.  While lobbying efforts may secure transitional measures or clarifications – as seen during the Bill’s passage through the House of Commons – a full reversal of the policy appears unlikely in the current political climate, particularly now the Bill has had its second reading in the House of Lords. That said, politics can be unpredictable, so this is one for all stakeholders in the letting industry to watch closely.