The End of Upwards-Only Rent Review? – Lexology
A New Direction for Rent Reviews
On 10 July 2025, the Government introduced the English Devolution and Community Empowerment Bill. Among its provisions is a potentially significant change for landlords and tenants: a ban on upwards-only rent review clauses in new commercial leases in England and Wales.
The stated policy objectives are to make commercial leasing fairer for tenants, ensure high street rents are set more efficiently, and stimulate economic growth. While the measure is aimed at creating a more balanced leasing landscape, its actual impact may be more muted, particularly in a market already trending toward shorter, more flexible leases.
What’s Changing?
Under the Bill, new commercial leases will no longer be able to include upwards-only rent review clauses or any provision guaranteeing a minimum uplift. Rent reviews must instead be based on a variable benchmark such as market rent, inflation or turnover, and must allow rent to decrease as well as increase.
Any lease term attempting to impose a one-way upward movement in rent would be overridden by statute.
Stepped rents, which are pre-agreed fixed increases written into the lease from the outset, are unaffected. The Bill also permits future regulations that could introduce exceptions. Government commentary suggests that caps and collars may be allowed, but further detail is awaited.
Scope of the Reform
The proposals apply to new commercial leases as defined by the Landlord and Tenant Act 1954. This is not restricted to leases with security of tenure and includes most leases granted to businesses for the purpose of occupation.
Key points to note:
- The new rules are not retrospective
- Existing leases will be unaffected
- Agreements for lease entered into before the legislation comes into force will continue under the current regime
- Head leases of underlet premises are not expected to be caught
No Contracting Out
The legislation contains comprehensive anti-avoidance measures. These are designed to prevent parties from sidestepping the new rules by disguising upwards-only reviews through indirect drafting. This includes situations where the tenant is required to accept a lease at a rent to be determined later. In all such cases, the tenant will benefit from the statutory override.
Tenant Control Over Rent Reviews
The Bill grants tenants the ability to trigger and operate rent reviews even where the lease provides that only the landlord can do so. This ensures that tenants are not trapped paying outdated or above-market rents simply because a landlord chooses not to initiate a review.
Next Steps
The Bill is at an early stage and will now proceed through the usual parliamentary process. This could take six to twelve months and is likely to attract substantial lobbying. Amendments are possible and the final wording may differ from the current draft.
A Look at Ireland
Ireland introduced a similar ban in 2010. Since then, commercial leases must allow rents to rise, fall or remain unchanged. Although there was some disruption initially, the long-term impact on investment appears to have been limited. Irish landlords have adapted through mechanisms such as minimum rent floors.
It is worth noting that the Irish legislation does not affect index-linked reviews. The position under the UK proposals remains to be clarified.
Is Reform Needed?
The leasing market has moved significantly since upwards-only clauses were first questioned in the early 2000s. Lease terms have shortened, five-year reviews are standard, and break rights are widely used. Many leases, particularly in retail, are now turnover-based.
In this environment, traditional rent review mechanisms are becoming less relevant. Structural issues such as vacancy levels and changing retail models have arguably had more impact than any rent review clause.
From an investment perspective, upwards-only reviews have long offered predictability, particularly for pension funds and insurers. That stability supports funding for long-term property development and is seen by many as a necessary feature of large-scale investment.
Historically, rent reviews would only have produced different outcomes in a few market cycles, such as after the dot-com crash and during the 2008 financial crisis.
Conclusion
This proposal may remove a feature of commercial leasing that has been in place for decades. Whether it leads to a material change in practice is another question. For many tenants and landlords, the market has already moved on. What remains to be seen is whether this reform will survive the legislative process or be set aside in favour of other policy priorities.
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