Knowledge

Is this the end for upwards-only rent reviews?

Upwards-only rent review clauses are a long-established and fundamental feature of commercial leases which help to underpin the value of commercial property investments. However, in England & Wales, draft legislation has been introduced to Parliament which could lead to a ban of such reviews.

If passed, the ban is likely to send shockwaves through the UK property investment market and could have far-reaching consequences for landlords, tenants and lenders.

What is an upwards-only rent review?

An upwards-only rent review generally provides that the rent payable from the review date (usually every three or five years) is the higher of:

• the rent payable immediately before the review date; or
• the open market rent for similar premises or the rent as it has been increased in line with the retail prices index.

This means that if the market or indexed rent decreases or stays the same, the actual rent payable by the tenant remains unchanged. For example, if a tenant pays £100,000 per annum and the market value falls to £90,000 at review, the tenant still pays £100,000 until the lease's next review date.

Current impact of upwards-only rent reviews

For landlords, upwards-only rent reviews have helped to ensure stable rental income streams, regardless of market volatility. This level of certainty helps to underpin property valuations and long-term investment decisions, which is particularly vital for institutional investors such as pension funds that rely on reliable, inflation-proofed income.  The guaranteed floor on rent makes commercial property an attractive asset class.

Upwards-only reviews can present significant challenges for tenants, especially during economic downturns. Tenants can find themselves locked into above-market rents, which can severely impact business viability and profitability.

Landlords frequently secure their borrowing obligations against commercial property. Commercial property is viewed as good security by lenders who calculate a market value based on the rental income payable under the occupational leases in place at the property. Historically, lenders have stipulated that all rent reviews are made on an upwards-only basis as a protection against the devaluing of the secured assets.

The UK government's stated policy aims address this perceived unfairness by seeking to "make commercial leasing fairer for tenants".

The English Devolution and Community Empowerment Bill: An unexpected shift in UK commercial leasing

The English Devolution and Community Empowerment Bill (the "Bill") was introduced to Parliament on 10 July 2025, and has unexpectedly included provisions that propose a significant reform to commercial leasing in England and Wales.

While the majority of the Bill focuses on devolving powers to local authorities and encouraging community-led growth, it also specifically targets upwards-only rent reviews.

What changes have been proposed by the Bill?

The Bill proposes to "ban" upwards-only rent review clauses in new commercial leases. This means that, notwithstanding any contrary terms in the lease, the rent would be able to go up or down at review, aligning the rent with prevailing market conditions. Any provision seeking to achieve an upwards-only outcome or a minimum uplift would be overridden.

The ban targets rent review clauses where the revised rent cannot be determined at the date the lease is granted and is calculated based on a variable. This includes traditional open market rent reviews, index-linked reviews (e.g., to inflation or another index/multiplier), and turnover-linked rents.

The Bill's explanatory notes suggest that while caps might be allowed, collars (minimum uplifts) would be prohibited, as they could circumvent the ban by effectively setting a floor at or above the current rent.

The Bill includes wide-ranging anti-avoidance provisions to prevent circumvention. Parties will not be able to contract out of these restrictions.

Crucially, to prevent landlords from "resting on a higher rent if the market falls" by simply not triggering a review, the Bill would give tenants the right to initiate a rent review and take any action required to operate it, even if the lease purports to reserve these rights to the landlord.

Side arrangements seeking to require the tenant to pay the difference between what is and what would have been the revised rent are also void. The extensive anti-avoidance provisions demonstrate the government's determination to make the ban effective and prevent landlords from circumventing its spirit.

How will commercial leases be adapted?

The commercial property market will inevitably adapt to new regulations. Landlords may respond by increasing initial base rents, favouring fixed or stepped increases.

These adaptations, while legally compliant, could inadvertently negate the policy's intended effect of making rents "fairer" or "stimulating economic growth" for tenants, especially small businesses.

This situation sets up a potential dynamic where legislative intent is met with market ingenuity. The ban might shift the risk profile rather than eliminate it entirely, potentially leading to less flexible lease structures, higher upfront costs for tenants, and a less attractive market for long-term institutional investment.

The ultimate effectiveness of the policy will depend heavily on how these market adaptations are managed or whether further regulatory interventions become necessary.

How has the ban been received by industry?

The British Property Federation has expressed concerns about the "impact of such announcements without consultation or warning on already fragile investor confidence" and the "limited benefit" it might have on high streets.

Many investors, including pension funds, are likely to be concerned about the uncertainty that downwards rent reviews would bring and the risk of stifling investment. It remains to be seen whether these provisions will become law in their current form or be amended to allow safe passage of other government priorities in the Bill.

The Bill is currently in its early parliamentary stages, with its second reading scheduled for 2 September 2025, meaning its final form is not yet known and significant lobbying is anticipated.

Which leases will be affected by the change?

The legislation is not retrospective so it would not affect existing leases granted before the legislation comes into force.

Leases which have not yet been granted before the Bill's introduction, but which are granted pursuant to agreements for lease entered into before the legislation comes into force, would also be excluded.

As discussed above, fixed or stepped rents, where increases are specified or can be determined at the start of the lease, are specifically exempted.

Conclusion

The proposed ban on upwards-only rent review clauses under the English Devolution and Community Empowerment Bill represents a significant policy shift for commercial property landlords, tenants and lenders in England and Wales.

Whilst the government's stated policy aims are to promote fairer leasing practices whilst stimulating economic growth, the lack of consultation with the property industry has drawn criticism. The proposed ban may be amended (or dropped completely) ahead of the Bill being passed but, if the ban comes into force, the impact on the UK property investment market will be significant. 

If you would like any further information, please get in touch with your usual Bedell Cristin contact or one of the contacts listed.