17th July 2025 ❘

Proposed ban on upwards-only rent reviews catches the property market by surprise

Proposed ban on upwards-only rent reviews catches the property market by surprise

Onwards, but not necessarily upwards?  The proposed ban on upwards-only rent reviews catches the property market by surprise. Our Commercial Property Partner Helen Hayward discusses…

I am pretty sure I wasn’t the only person to be caught off guard with the news last week that the Government has “on the quiet” hatched a plan to ban upwards-only rent reviews in new commercial leases in the English Devolution and Community Empowerment Bill.  For a proposal representing one of the most significant landlord and tenant power shifts in recent years, it arrived rather stealthy embedded in Schedule 31 of this Bill – whose headline purpose is to devolve powers to local authorities.  There was no prior consultation or discussion with the sector on this proposed change.

So, what is proposed?

  • The legislation would prohibit upwards-only rent reviews in all new leases and renewals (including renewals under the Landlord & Tenant Act 1954)
  • It would be applicable to all commercial property (but would not apply retrospectively to existing leases)
  • It would include anti-avoidance measures (for example by including the right for a tenant to trigger a review, even if this was expressly only reserved to a landlord in a lease)
  • There is reference to the Government being able to issue regulations for caps and collars, but no further details on this point are provided
  • It would apply to rent reviews where rents are reviewed in accordance with a variable not known when the lease is granted – indexed rents, market rents and turnover rents would be covered
  • It wouldn’t apply to leases with specified stepped rent increases and leases without review provisions would not be impacted

What the Government hopes to achieve

According to the Government, the focus is to help businesses on the high street – to “help keep small businesses running, boost local economies…help end the blight of vacant high streets”.  However, it is not hard to spot that the Bill is not limited to the high street or indeed to retail. Undoubtedly too, the property industry will question if this is a properly thought-through strategy for the problem in our town centres.  A problem which many might say is more complicated and nuanced than this change could seek to address.

For and against?

With clients on both sides of the fence, I recognise that this is potentially exciting news for tenants; perhaps an opportunity to level the playing field where market forces and legacy practices have been unfair to tenants for too long.  I remember as an in-house lawyer marveling about how much fairer some jurisdictions we operated in were to tenants – why shouldn’t a rent truly reflect the market in which it exists by being able to move both up and down?  Experience in Ireland, where a similar change was introduced in 2010, seemed to demonstrate that the market adapted relatively well.

But undoubtedly this is a worrying prospect for investors and banks.  Many will worry that it could cause a damaging change in the landscape.   The certainty of a rent review that can only go up is highly attractive to the market.  There is already speculation about how this could deter investment into the sector, and about the wider knock-on impacts.  Ultimately, it could backfire on tenants in the medium and longer term too – with landlords setting higher initial rents, requiring fixed rent increases and only offering shorter leases where no reviews are needed, or leases with mutual break rights to allow landlords to trigger new rents through the backdoor.

What’s next….

This Bill is just at the start of what is now a long legislative journey.  I certainly won’t be placing any bets at the moment about where, if at all, it might end up on this issue.  So, for now, we take a careful watching brief – and let the lobbying commence!