Ban on upward-only rent reviews in commercial leases

The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026 and, among its broader devolution measures, contains provisions that prohibit upward-only rent review clauses in commercial leases in England and Wales.

For landlords, tenants, investors and lenders alike, the implications are considerable and, in some respects, immediate.

If you are a landlord or tenant involved in commercial lease negotiations, renewals, contact our solicitors for clear, practical advice on how the new legislation may affect you.

What is an upward-only rent review?

An upward-only rent review is a mechanism long established in commercial leases, under which rent can only remain static or increase at each review date; it can never fall. Such clauses have been commonplace in the UK commercial property market, offering landlords and investors income security and predictability in their rental returns.

The Government's stated rationale for the ban is to ensure that rent review mechanisms genuinely reflect prevailing market conditions, rather than artificially constraining movement to one direction only.

What does the Act actually prohibit?

The Act renders unenforceable any upward-only element in rent review clauses where the reviewed rent is not fixed or fully ascertainable at the outset of the lease term. In practical terms, this means that open market rent reviews, by far the most common form in commercial leases, can no longer be structured so that rent is prevented from falling if the market so dictates.

A point of note: an upward-only rental increase is permitted where the rental amounts are clearly set out in the lease, such as stepped increases or where a lower rent is granted for the initial year.

Is the legislation retrospective?

Any renewal lease entered into pursuant to a lease granted on or after 17 March 2026 appears to fall within the Act. This includes renewal leases granted under options contained in the original lease or in separate option agreements. The consequence is that the initial rent and subsequent reviews under a renewal lease could be capped by the review mechanism, even where that produces a lower figure than the passing rent under the original lease.

Implications for the market

For tenants: the reform offers meaningful protection. Rents will now be capable of adjusting downward to reflect falling markets, reducing the risk of businesses being locked into rents above current market value. Tenants will also have the right to actively trigger rent reviews to enforce the provisions.

For landlords and investors: the picture is more complex. Income projections on reversionary interests will need to be reassessed. There is a risk that landlords respond by preferring shorter leases of three to five years, which may provide flexibility but offer tenants less certainty and may conflict with the needs of businesses investing in fit-out costs.

Index-linked reviews: may also become more prevalent; we have already seen an increase in heads of terms, providing that rent review provisions are based on RPI or an upward-only open market. However, it is worth noting that index-linked increases could, in some circumstances, be less favourable to a tenant than an open market review.

Next steps

Given the Act's immediate relevance to renewal leases, we recommend:

1. Review any live lease negotiations that include options to renew, and consider whether rent review provisions should be updated to reflect the Act.
    
2. Assess existing portfolios for leases granted on or after 17 March 2026 that contain renewal options, to understand the potential impact on future rent projections.

Contact our commercial property solicitors

Although the Act has now received Royal Assent, further regulations and practical guidance are still expected, meaning landlords and tenants should continue monitoring how the reforms develop in practice.

We advise landlords, tenants, investors, developers and business owners on commercial leases, lease renewals, acquisitions, disposals, and wider property matters affecting commercial premises and investment portfolios.

With offices in London, Brighton, Bath, Eastbourne, Hastings, and Ulverston, we support clients nationwide on everything from straightforward lease negotiations to complex, high-value commercial property transactions and portfolio management matters.

Get in touch to speak with our team.