Are upwards-only rent reviews becoming a thing of the past?

The ban on upwards-only rent reviews is now part of the statute book, with the commercial property sector awaiting the commencement regulations that will bring the provisions into force. While the implementation date remains uncertain, landlords, tenants, investors and property professionals should begin considering how the reforms may affect lease negotiations, portfolio management and future transactions. Those who understand the potential impact of the reforms and adapt their leasing strategies accordingly will be best placed to navigate the changing commercial property landscape.

For decades, upwards-only rent review clauses have been a cornerstone of commercial leasing, providing landlords with certainty that rent will either increase or remain unchanged at review dates, regardless of market conditions. However, the English Devolution and Community Empowerment Act 2026 contains provisions which, once brought into force, will prohibit upwards-only rent review provisions in business tenancies in England and Wales. This is likely to represent one of the most significant changes to the commercial leasing landscape in recent years. Although the relevant provisions have received Royal Assent, they have not yet been brought into force and will require commencement by secondary legislation before they take effect. Until commencement, existing law continues to apply.

Once commenced, the legislation will restrict the use of upwards-only rent review provisions in business tenancies in England and Wales, including certain tenancy renewal arrangements. Landlords and tenants will therefore need to consider alternative rent review mechanisms, such as open market, index-linked or turnover-based reviews, provided they are drafted so that the reviewed rent can move both upwards and downwards.

Where a prohibited upwards-only rent review provision is included in a business tenancy, the Act provides that the offending provision will be treated as having effect on an upwards-and-downwards basis rather than being void or causing the rent review machinery to fall away altogether.

Once commenced, the legislation is expected to have significant implications for landlords, investors and tenants alike. While fixed rental increases and stepped rent arrangements should remain permissible where the revised rent is fixed or fully ascertainable at the date the lease is granted, traditional upwards-only review mechanisms will no longer be available where the reviewed rent is not ascertainable at grant and is prevented from decreasing. This is likely to result in a fundamental shift in lease drafting and rent review negotiations. Landlords may seek to offset the resulting uncertainty through higher initial rents, shorter lease terms or alternative review structures, while tenants may benefit from greater protection where market rents decline.

Legal implications for landlords and tenants

The changes raise a number of important legal and commercial considerations.

For landlords, upwards-only rent reviews have traditionally provided a predictable income stream and have often been reflected in investment appraisals and property valuations. The move towards more flexible review provisions may introduce greater uncertainty regarding future rental income and could impact the way commercial assets are assessed and marketed. Lease drafting is also likely to become more complex, with parties needing to carefully consider the operation of alternative rent review mechanisms and the allocation of risk between landlord and tenant.

For tenants, the legislation has the potential to provide greater protection against rents becoming disconnected from prevailing market conditions. In a declining market, tenants may benefit from review provisions that allow rent to decrease as well as increase. However, greater flexibility may also give rise to more extensive negotiations at the outset of a lease and an increased likelihood of disputes concerning rental valuations, review assumptions and review procedures.

The legislation may also alter the balance of power during lease negotiations. As landlords seek alternative methods of protecting investment returns, tenants should carefully consider the wider commercial implications of any proposed rent review structure, particularly where higher initial rents or shorter lease terms are being offered in place of an upwards-only review provision.

Impact on lease renewals

A particularly noteworthy feature of the legislation is its limited transitional and anti-avoidance effect. Although the ban has not yet been brought into force, the Act contains provisions which may affect certain tenancy renewal arrangements entered into on or after 17th March 2026. These may include contractual renewal options, agreements for lease, reversionary lease arrangements or other arrangements which commit the parties to the grant or taking of a renewal tenancy, including arrangements connected with a business tenancy protected by the Landlord and Tenant Act 1954. However, ordinary statutory renewal steps under the 1954 Act, such as service of notices or court determination of renewal terms, should not be treated as automatically caught unless accompanied by a qualifying renewal arrangement within the statutory scope.

The legislation therefore creates an additional layer of complexity for parties negotiating renewals. Careful consideration should be given to whether any proposed renewal arrangement entered into on or after 17th March 2026 could be caught by the new regime once commenced. Early legal advice will be important to ensure parties understand the possible impact on renewal terms and to minimise the risk of unintended consequences.

There may be difficult questions where a renewal lease is granted before commencement but pursuant to an arrangement entered into on or after 17th March 2026, and parties should take advice on the application of any commencement, transitional or saving provisions once published.

What should parties do now?

Landlords and tenants currently negotiating renewals should not assume that existing market practice will continue unchanged. Early consideration should be given to the potential impact of the legislation on proposed rent review provisions, particularly where renewal rights are being exercised or negotiated. Taking advice at an early stage may assist in identifying whether a transaction could fall within the scope of the new regime and in structuring lease terms accordingly.

While the legislation has not yet been commenced, landlords, tenants and investors should start preparing for the changes now by:

• Reviewing any ongoing lease renewal negotiations;
• Considering whether existing rights to renew may be affected by the new regime;
• Assessing whether alternative rent review mechanisms may be more appropriate;
• Reviewing portfolio documentation to identify leases with upcoming renewals; and
• Seeking legal advice before agreeing heads of terms for lease renewals.

Investors should also consider the potential impact of the reforms on asset valuations, rental projections and investment appraisals, particularly where portfolios contain a significant number of leases that may be subject to future renewal negotiations.

Looking ahead

If you would like advice on how these forthcoming changes may affect your lease negotiations, renewals or property portfolio, please contact our Commercial Property team.

This article reflects the position as at July 2026. The relevant provisions have received Royal Assent but are not yet in force. The commencement regulations, any additional transitional or saving provisions, and any accompanying guidance should be checked once published.