Proposed Ban On Upwards-Only Rent Reviews: What It Means For Commercial Landlords And Tenants

A proposed change in the law could significantly alter how commercial rents are reviewed in England and Wales. The Government is currently progressing legislation that would introduce a statutory ban on upwards-only rent reviews in commercial leases.

If you are a commercial landlord or tenant, this development could have a direct impact on your rental income, business planning and future lease negotiations. Sam Flowers, Associate Solicitor in our Commercial Property department, explains more here about the proposed changes, what it means for landlords and tenants, and how you can take action now in preparation.

What is being proposed?

The Government is proposing a statutory ban on upwards-only rent reviews (UORRs) in commercial leases. These changes form part of the English Devolution and Community Empowerment Bill, which is currently being scrutinised in the House of Lords. While the final detail is still under negotiation, the widely accepted view across the property sector is that some form of the ban is likely to become law.

The proposed ban would prohibit the following arrangements in new commercial leases:

• Traditional upwards-only market rent reviews
• Index-linked rent reviews that include caps and collars (index-linked reviews without a minimum uplift would remain permitted)
• Turnover rents with minimum base rents

The Government's stated aims are to support regeneration and revive high streets by improving affordability and to rebalance risk between landlords and tenants. At present, upwards-only rent reviews tend to place all the downside risk on tenants, while landlords enjoy guaranteed income growth, and these proposals seek to change that dynamic.

A new right for tenants to trigger a rent review

The bill also proposes the introduction of a new statutory right for tenants to instigate a rent review. This would apply even if the lease is drafted so that only the landlord can trigger the review.

Practically, this means that where market rents have fallen, a tenant could push for a downward adjustment without being blocked by a landlord delaying or refusing to engage, representing a major shift in commercial leasing practice.

Who will be affected?

The proposed ban will apply to business tenancies covered by Part Two of the Landlord and Tenant Act 1954. In broad terms, this includes tenants who occupy premises for business purposes.

Importantly, despite the focus on high street regeneration the proposals are not limited to retail leases, and will apply across all commercial sectors, including offices, warehouses and industrial units

The ban will not apply retrospectively, meaning that existing leases will not be affected as the ban will apply only to new leases granted after the law comes into force. At present, there is no confirmed implementation date.

What the changes mean in practice

If the proposed ban becomes law, it will introduce a fundamental shift in commercial leasing.

Rents could go down as well as up

For the first time in many commercial leases, rent would be able to decrease as well as increase during the term. While this offers welcome protection for tenants, it introduces a clear income risk for landlords that has not existed under upwards-only arrangements.

Fixed rental increases may become more common

The ban will not affect stepped or fixed rent increases agreed at the outset of a lease. As a result, we may see:

• More leases incorporating pre-agreed rental uplifts
• Tenants accepting fixed increases in exchange for improved incentives elsewhere in the lease

Higher initial rents

Some landlords may look to set higher starting rents to offset the future risk of downward reviews. In response, tenants are likely to seek stronger concessions, such as rent-free periods or reduced break penalties.

Shorter lease terms

To avoid the risk of downward rent reviews altogether, landlords may increasingly prefer shorter lease terms, such as three or five years. Contracting out of the Landlord and Tenant Act 1954 is likely to become a non-negotiable for landlords to retain control on renewal. We may also see an increase in mutual (or landlord-only) break options to ensure flexibility. Such matters will depend on the relative bargaining strength of the parties.

Index-linked reviews without collars

Index-linked rent reviews without a minimum increase would remain lawful. Given recent inflation trends, landlords may see this as a way of linking rent movement to economic conditions rather than market fluctuations. Index-linking has already grown in popularity and these changes may accelerate that trend.

Anti-avoidance measures

The draft Bill contains specific anti-avoidance provisions designed to prevent landlords from attempting to side-step the ban through alternative drafting.

What should landlords and tenants do now?

While there is no confirmed timetable for implementation, preparation is essential.

For landlords

You should consider:

• Reviewing your existing portfolio and upcoming lease renewals
• Re-assessing long-term income projections
• Considering how future lease structures can manage the risk of rent decreases while remaining commercially attractive

For tenants

You may wish to:

• Factor the potential ban into current lease negotiations
• Consider how future rent review provisions may affect your long-term business affordability
• Seek favourable commercial terms now if you believe upward pressure on rent could return on renewal

We understand that understanding these changes requires careful balancing of commercial risk and opportunity, and our Commercial Property Lawyers are here to provide their advice and guidance.

Key takeaways for commercial property landlords and tenants

• A statutory ban on upwards-only rent reviews is being proposed for commercial leases
• The changes will apply to new business leases only, not existing agreements
• Tenants may gain the right to trigger rent reviews, even where leases currently prevent this
• Landlords may face income risk, prompting changes to lease length, rent structures and incentives
• Early preparation allows both landlords and tenants to protect their commercial position

Frequently Asked Questions on the proposed ban on upwards-only rent reviews

1. Will commercial rents fall after the upwards-only rent review ban?

In individual cases the ban on upwards-only reviews does create the possibility of rents falling during the lease term. However, to offset this, we may see higher starting rents across the board leading to an overall increase in commercial rental values.

2. Can landlords refuse a rent reduction under the new rules?

No, in the same way that a tenant cannot refuse an uplift under current rules, except in cases of manifest error. Disputes over reviews would still be referred for expert determination whose decision will usually be final. If a lease contains a mechanism purported to be banned by the new rules, the landlord would not be able to rely on the upwards-only provisions.

3. Will the upwards-only rent review ban affect property investment values?

Investment values could potentially be affected. Any reduction in long-term rental certainty can influence how investors assess risk, yield and future income projections, which may affect valuation models for some commercial assets.

4. Will this change make commercial leases riskier for landlords?

The change could increase risk, in the sense that income certainty will reduce. Landlords will need to manage risk through lease length, starting rent, review structure and break clauses, rather than relying on guaranteed uplifts.

5. Should I renegotiate my commercial lease because of the new rent review law?

If you are approaching a renewal or negotiating a new lease, it is sensible to review your strategy now, as the timing of your transaction could affect whether the new rules apply.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.