In a move that caught many off guard, the England Devolution and Community Empowerment Act 2026 introduced a ban on upwards-only rent reviews in commercial leases, the ban is unlikely to take effect until 2027 or 2028.
Upwards-only rent review clauses meant that, on review, rent could only stay the same or increase. Even if the market conditions were spiralling downwards, the rent review could not fall in response. For landlords and investors, this review method offered predictable income in the face of cyclical market volatility. However, for tenants operating during an economic downturn, this often meant paying high rents that were unreflective of the market. It was precisely this that prompted the government to take a firm stance against upwards only rent reviews.
What is the Scope of the Ban?
The ban applies to commercial leases falling within the Landlord and Tenant Act 1954, covering both contracted-out and non-contracted-out leases. It applies as long as the permitted use is for business purposes, even if the tenant isn’t in actual occupation, or is using the premises for something else entirely.
The ban generally takes effect for leases entered into after the Act comes into force. However, renewal agreements are caught too, regardless of when completion actually happens. So, businesses currently mid-negotiation on a renewal should not assume they are unaffected simply because the ban isn’t technically in effect yet.
How Does the Ban Work?
Under the Act, a review clause is void where the rent isn’t fixed or ascertainable at grant, the mechanism only allows increases, and the resulting rent exceeds a reference figure, whether that’s an indexed figure, an open-market rent, or a turnover-derived amount. It also catches clauses that produce a rent lower than the current rent payable but still above that reference figure. In effect, the drafting routes that might have preserved an upwards-only outcome indirectly are targeted as well.
What Does This Mean in Practice?
For tenants, this ban marks a watershed moment in the commercial property sector as rents can now move with the market in both directions, not only upwards. This could potentially give tenants greater scope to negotiate reductions during a downturn.
For landlords, as the ban will result in greater income variability, they are likely to adapt how they structure and price leases in response. This could manifest itself in shorter lease terms, more frequent reviews, fixed or stepped increases agreed at grant, and higher starting rents to offset the loss of income certainty. Turnover-based rents may also become more common as landlords look for alternative ways to manage risk.
In the coming years, this ban will be a key consideration shaping how new commercial leases and renewals are negotiated.