Ban on upwards-only rent review clauses

The English Devolution and Community Empowerment Bill received Royal Assent on 29 April 2026.

Most of the new Act concerns devolved powers for local government. However, it also includes provisions prohibiting the use of upwards-only rent reviews (UORR) in both new and renewal commercial leases in England and Wales.

Major change to commercial leases

Traditionally, many commercial leases only allow rent to increase at review, even if market conditions have fallen between completion of the lease and the review date.

Under the Act, the rent determined at review may go up or down. Any wording in a lease caught by the Act stating that the rent must be reviewed on an “upwards-only” basis will no longer take effect and will be prohibited.

You cannot contract out of the ban: anti-avoidance provisions are in place to prevent circumvention.

Rent review provisions without an upwards-only element will still be permitted, such as stepped rents, index-linked rents and open market rent reviews.

Which leases does the ban apply to?

All leases that are occupied by the tenant for business purposes, or that could be occupied for business purposes, are caught.

When does the Act take effect?

It is expected to be in force in early 2027. Further regulations are required to bring the ban into force, so the commencement date is not yet clear.

Generally, the ban will not be retrospective: it will apply only to new commercial leases granted after the ban has come into force.

There is one notable exception (following an amendment made by Baroness Taylor). The Act is intended to have an immediate impact in respect of leases granted on or after 17 March 2026 that include a right to renew. Any subsequent lease granted to an existing tenant pursuant to such a renewal is likely to be caught by the Act.

If a renewal option is agreed on or after 17 March 2026 and the renewal rent is not known when that option is granted, the ban will apply to the rent on renewal and to any subsequent review during the renewal term.

Subleases

The ban will disapply any requirement for a sublease granted by the tenant to include an upwards-only rent review, after the ban comes into force. As a result, tenants taking a lease now may be nervous about agreeing to UORR provisions in their new lease, as their ability to sublet could be compromised in a falling market. This may mean that underlease rent is lower than the passing rent the tenant pays under the headlease.

Superior landlords may feel uncomfortable about their inability to control the level of rent payable under a sublease. The Act states that any rent review required under a sublease should be agreed between the landlord and the tenant, meaning a superior landlord will no longer be involved in the process or have control over the outcome.

What changes might this mean in practice?

1. The initial rent agreed between a landlord and tenant for a new lease may be artificially inflated to offset any future decrease on review or renewal
2. Landlords and tenants may start to opt for shorter leases without a rent review clause
3. Landlords may opt to use stepped, fixed rent increases on certain anniversaries of the term commencement, which are permitted under the Act
4. Landlords may also opt for index-linked reviews, which will be permitted, rather than open market reviews, as inflation-linked reviews are less likely to result in a rental decrease
5. Landlords will not be able to maintain control of the rent review process by holding reviews back, as the Act will also allow tenants to trigger rent reviews.

Uncertainty Remains

At the time of writing, there are still several unknowns in relation to the ban, including:

1. When will the ban take full effect? As noted above, we do not yet know the exact date the ban will take effect.
2. Further Government consultation – Before the ban comes into force, the Government has agreed to carry out a consultation on the use of caps and collars as part of the review mechanism, and whether these will be banned entirely or whether some arrangements (for example, allowing rents not to fall below a certain percentage) will be permitted by secondary legislation.
3. The impact of anticipated Government guidance – We understand there is likely to be Government guidance indicating that a review to the higher of two upwards/downwards review mechanisms would be permitted.
4. Commercial impacts on landlords – The impact on landlords’ ability to service existing debt should rents fall significantly as a result of the ban.

At Thomson Snell & Passmore, our expert real estate lawyers continue to monitor the progress of this Act and how best to draft rent review provisions in certain circumstances. To discuss this further, please contact Oliver Butler or a member of our Real Estate team.