Looking ahead: Navigating the impending ban on upward-only rent review clauses

The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026, with the full Act being published on 11 May 2026.

Schedule 37 of the Act, relating to a ban on upward-only rent review (UORR) clauses in business tenancies is not yet in force. Implementation is unlikely before 2027. Once implemented, it will result in a significant change for the commercial property market in England and Wales. Landlords, tenants, investors and developers should start considering the possible implications for existing asset values, lease negotiations and lease renewal strategies.

How will it work?

The proposed provisions will apply to all business tenancies (not just protected tenancies under the Landlord and Tenant Act 1954), where the rent is determined by a review formula, as opposed to stepped rent increases, which are not caught by the ban.

Whether a whole rent review clause will be void or if just the UORR element will be ignored is still uncertain and government regulations or guidance is necessary. The current drafting of Schedule 37 seems to suggest the latter.

The Act does allow for index linked rent reviews, as long as the review is not upwards only. Consultation on caps and collars, such as a floor and ceiling to CPI or RPI linked rent reviews, is expected before commencement. Guidance would also be required on whether annual compounding of index linked reviews will be permitted.

Will The ban be retrospective?

As noted above, the implementation of Schedule 37 has not yet taken place and is not expected until 2027 at the earliest. While the ban on UORR will impact new leases entered into after the date of implementation, importantly, the ban has the potential to affect the initial rent payable under certain renewal leases, after 17 March 2026, creating a form of retrospective effect.

Rent review in renewal leases will be caught by the ban, if the renewal is pursuant to an option dated on or after 17 March 2026. The ban will cover both the day one rent review of the renewal lease and any rent reviews during the renewal lease.

The Act would also prevent landlords from circumventing the ban by structuring renewal arrangements in a way that indirectly results in an upward-only outcome for the rent, such as by way of a ‘put’ option or a ‘call’ option.

Other headline takeaways of the legislation

  • There are anti avoidance provisions in the legislation, such as to prevent side agreements between the parties to contract out of the ban or that require the tenant to “top up” the rent.
  • Head-Landlords will not be permitted to include requirements in their leases that any sub-leases have an upward only rent review if the rent under the head-lease is greater than open market rent of a sub-lease.
  • A tenant will have the power to trigger a rent review by notice to the landlord, even if the terms of the lease do not give the tenant that power, on the same dates as when a landlord can trigger a rent review.

The impact

The proposals could lead to behavioural changes across the market. Landlords may seek shorter lease terms, higher initial rents or to exercise break options in response to the loss of upward-only protection.

Parties may need to consider whether rents can be fixed or determined at the outset in order to reduce uncertainty around how the new rules could apply.

Alternatively landlords may seek to use index linked rent reviews, although as noted above there is further information awaited on the cap and collar type arrangements and if annual compounding will be permitted.

There also remains uncertainty around the final form of Schedule 37 of the Act, particularly whether a rent review provision purporting to be an upwards rent review that would fall foul of the Act will mean the whole clause would be void or that it would be ignored for the purposes of reviewing the rent.

Landlords should review their lease portfolios and upcoming renewals to identify situations where the proposed provisions could materially affect rental outcomes.

For landlords, investors and occupiers, early strategic advice and careful planning are likely to become increasingly important as the ban moves closer towards implementation.

 

 

The content of this article is intended to provide a general guide to the subject matter.

If you have any questions about the topics raised in this article, please feel free to contact a member of the Real Estate team.