Upward-only rent reviews to be banned in new commercial leases

Posted Monday 28th July 2025

The Government is proposing a major change to commercial leasing law that will affect both landlords and tenants across England and Wales. Under the English Devolution and Community Empowerment Bill, currently before Parliament, upward-only rent review clauses will be banned in all new commercial leases and lease renewals.

For many landlords, these clauses have long been relied upon to ensure predictable, rising rental income. But they’ve also been the subject of criticism, particularly from tenants, who argue that such clauses lock them into inflated rents even when market conditions deteriorate.

If passed into law, the Bill will prohibit the inclusion of any provision that prevents rent from falling at review. Rent reviews will need to reflect genuine market movement, whether upward or downward. This reform is part of a broader effort by the Government to support small businesses, address rising commercial vacancies, and encourage more flexible, sustainable leasing models, particularly on struggling high streets.

The ban will apply only to new leases and renewals granted after the legislation comes into effect. Existing leases containing upward-only clauses will not be affected. It’s worth noting that the legislation also includes anti-avoidance provisions, meaning landlords won’t be able to sidestep the rules by drafting equivalent restrictions in a different form.

Pros of an upward-only rent review ban

For Tenants:

• Fairer Market Alignment – Rent could decrease if market values fall, protecting businesses during downturns.
• Cost Flexibility – Helps tenants manage costs more dynamically, especially during periods of economic hardship (e.g., COVID, recession).
• Improved Business Viability – May reduce the number of business closures caused by rent burden, especially for small businesses and retailers.
• Increased Bargaining Power – Shifts lease negotiations in favour of tenants, improving overall lease terms and flexibility.

For the Market:

• More Efficient Use of Commercial Space – Encourages lease renewals and occupancy, reducing vacancy rates and urban blight.
• Retail Sector Support – Supports struggling high streets and independent retailers by making rents more responsive to real economic conditions.
• Modernisation of Lease Practices – Aligns lease structures more closely with international standards and economic realities.

Cons of an upward-only rent review ban

For Landlords:

• Reduced Income Security – Potential for declining rental income, especially in weaker markets.
• Asset Devaluation Risk – Rent volatility can reduce commercial property values and complicate financing or investment decisions.
• Investor Deterrence – Institutional investors (e.g. pension funds) may be less inclined to invest in UK property without predictable returns.
• More Complex Rent Disputes – Market-based rent adjustments could lead to more frequent disputes and arbitration over what constitutes “market rent.”

For the Market:

• Greater Volatility – Rent-linked property values could fluctuate more widely, affecting financial stability in property-backed sectors.
• Potential for Short-Termism – Landlords may push for shorter leases or frequent rent reviews to retain control over rent setting.
• Reduced Development Incentives – Lower or less predictable income may reduce the appetite for commercial property development or refurbishment.

Stakeholder	Pros of Ban	Cons of Ban
Tenants	Fairer rents, cost relief in downturns	Potential for less generous lease incentives
Landlords	N/A (few clear benefits)	Income loss, devaluation, higher financing risks
Economy/Society	Revitalised high streets, fewer closures	Greater rent volatility, investment chill

 

Please contact Charlotte White for a free introductory call or for more information.

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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