Ban on upward-only rent reviews: What landlords and tenants need to know

The ban on upward-only rent reviews is one of the most significant proposed changes to commercial leasing in England and Wales in recent years. Although the relevant provisions are not yet in force, the legislation has been passed and is already influencing lease negotiations, renewal strategies and investment assumptions. For commercial landlords, the key issue is straightforward: where rent is reviewed by reference to a variable mechanism, the reviewed rent will no longer be able to move in only one direction. Landlords should therefore be reviewing precedent documents, pipeline transactions and renewal structures now. As uncertainty around the market and reliability of income increases; stepped rents offer an alternative that brings more stability and certainty to the key issue.

What is being banned?

An upward-only rent review is a clause under which rent can stay the same or increase on review but cannot fall. For decades, those provisions have been a standard feature of commercial leases because they support income certainty and are often reflected in valuation and funding assumptions. The ban will remove the upward-only element of open market, index-linked and turnover-based review provisions, with the result that reviewed rents must be capable of moving down as well as up.

The ban is contained in Schedule 37 to the English Devolution and Community Empowerment Act 2026, which received Royal Assent on 29th April 2026. The relevant provisions are not yet in force and will take effect on a commencement date to be set by secondary legislation. Current market commentary suggests that commencement is unlikely before 2027. Once in force, the regime will apply to business tenancies in England and Wales, including leases that are contracted out of Part II of the Landlord and Tenant Act 1954 and certain superior leases that would fall within that regime if the tenant were in occupation.

The legislation is principally aimed at new leases granted once the provisions come into force, rather than rewriting existing leases retrospectively. The retrospective point is narrower than that. It applies to a lease granted pursuant to a tenancy renewal arrangement entered into on or after 17th March 2026, even if the ban is not yet in force when that arrangement is made. In practice, that is likely to include renewal options in existing leases (whether exercisable by the tenant or the landlord), agreements for renewal leases and other arrangements for a further tenancy arising out of an existing landlord and tenant relationship. By contrast, an ordinary agreement for lease with a new tenant, or a reversionary lease completed before commencement, is generally understood to fall outside that limited retrospective regime. The Act also contains anti-avoidance provisions intended to prevent parties from recreating an upward-only outcome by another route, for example through side arrangements or rent floors designed to neutralise any downward movement. In addition, provisions in existing leases requiring subleases to include upward-only rent review machinery will become ineffective once the ban is in force, and tenants will have greater ability to trigger rent reviews.

What does this mean for landlords in practice?

For commercial landlords, the most immediate consequence is the loss of automatic downside protection on variable rent review. If the market has weakened by the review date, the rent may reduce rather than simply remaining at the passing rent. That may affect asset management strategy, underwriting assumptions, lender discussions and the pricing of new deals. It also means landlords should revisit lease precedent banks, heads of terms and renewal documentation, particularly where open market or indexed review wording currently assumes an upward-only outcome. Landlords with subletting structures or option-based renewal arrangements should review those documents with particular care.

How stepped rents can help

One practical alternative for landlords is the use of stepped rents. A stepped rent clause sets out fixed rent increases in advance, so the rent moves to specified amounts on specified dates rather than being determined by a future review exercise. Because those figures are agreed and ascertainable when the lease is granted, stepped rents are generally outside the scope of the ban affecting variable upward-only review mechanisms. Properly used, they can still deliver planned rental growth while preserving a clear and predictable rent profile throughout the term.

Stepped rents are not, however, a universal solution. The commercial profile must still be acceptable to the tenant, and the drafting needs to be carefully structured so that the clause is genuinely a fixed rent schedule rather than a disguised review mechanism. Landlords should also consider the wider lease package, including incentives, term length, break rights, alienation provisions and service charge recovery, because the removal of traditional upward-only review may alter the overall balance of the deal.

Stepped rents do however make commercial sense from a cost and risk perspective. Because the rent increases are fixed in advance, landlords may be able to avoid the time, professional fees and evidential disputes that often accompany open market or index-linked review processes. Just as importantly, stepped rents avoid the risk of a variable review producing a lower rent on the review date. If the lease instead contains fixed increases agreed at the outset, the landlord has greater certainty over future income and can budget with more confidence. For many portfolios, that combination of simplicity, reduced transaction cost and income visibility may prove attractive. Early legal input will be important where landlords are considering alternative review structures across a portfolio or in renewal negotiations.

How can we help

Although the ban is not yet in force, commercial landlords in England and Wales should be preparing now. The direction of travel is clear: variable rent review mechanisms will need to accommodate downward as well as upward movement, and some renewal structures are already affected by the legislation’s retrospective features.

Our commercial property team can advise both landlords and tenants on the practical implications of the ban, including lease renewals, heads of terms, rent review drafting, stepped rent structures, subletting controls and wider negotiation strategy. Whether you are seeking to preserve income certainty as a landlord or understand the opportunities and risks created by the new regime as a tenant, we can help you navigate the transition and put appropriate lease documentation in place.