Commercial leases: guide to the proposed ban on upwards-only rent reviews

The English Devolution and Community Empowerment Act received Royal Assent on 29 April 2026. Although the new Act will do many things (including significant reforms to the assets of community value regime), the real estate sector has been focussing on the ban on upwards-only rent reviews in new commercial leases.

In his series of pre-MIPIM articles, Darren Hamer considered the potential implications of such a ban (see ‘Commercial leases – is this really the end for upwards-only rent reviews?’). In this article, we answer the questions we are being asked about how the legislation will work in practice.

When will all this happen?

The first thing to note is that nothing changes immediately (subject to the comment below about retrospective effect). Regulations will be required to bring the ban into force, and we are expecting at least one consultation before this happens.

Hopefully the government will publish a roadmap for implementation now that the legislation has been passed. The government’s final stage risk assessment from November 2025 assumed the ban will go live in 2027/28.

What types of lease will be affected?

The legislation will affect most commercial leases.

Leases will be caught if they are business tenancies within Part 2 of the Landlord and Tenant Act 1954 (leases where the tenant is in occupation for business purposes). Leases that have been ‘contracted out’ of statutory security of tenure are still within Part 2 and will therefore be subject to the ban.

An amendment made during the passage of the Bill brought leases that are outside Part 2 because the tenant is not occupying for business purposes (or at all) within scope of the ban.

But leases that are outside Part 2 for other reasons (for example, section 28 of the 1954 Act excludes leases where an agreement is in place for a future tenancy) will not be caught and upwards-only provisions will continue to have effect.

Does the ban only affect leases granted after the legislation comes into force?

Only leases granted after the legislation comes into force will be caught.

This will include renewal leases under the Landlord and Tenant Act 1954. A landlord who currently enjoys an upwards-only rent review will lose that benefit once the lease is renewed after the commencement date.

Once the ban goes live, the only leases that can be granted with a fully functioning upwards-only rent review are leases granted pursuant to ‘pre-commencement arrangements’. So, if an option or agreement for lease is already in place, or is put in place between now and the commencement date, the ban will not apply to the lease (even if the lease is granted after the commencement date) and any upwards-only provisions will have full effect.

There is however an important caveat to this…

Does the ban have retrospective effect?

A late amendment to the Bill made by the House of Lords removes the ‘pre-commencement arrangements’ exception if the pre-commencement arrangement is a ‘tenancy renewal arrangement’ (an option or agreement to renew entered into with the existing tenant) entered into on or after 17 March 2026.

So, unlike other leases granted after the commencement date pursuant to pre-commencement arrangements (which will escape the ban), leases granted after the commencement date but pursuant to tenancy renewal arrangements entered into on or after 17 March 2026 will be caught by the legislation. Any upwards-only clauses in such leases will have no effect.

Even though the legislation is not yet in force, landlords and tenants entering into such tenancy renewal arrangements now need to be cognisant of this retrospective effect. An agreement entered into now to renew a lease in the future may have a different outcome than extending the lease now by way of a reversionary lease.

What about existing leases?

Leases granted prior to the commencement date can never be caught, only leases granted after the ban is brought into effect. Upwards-only rent reviews in existing leases will therefore remain valid throughout the term of the lease and will operate as they always have.

This includes upwards-only rent reviews in reversionary leases granted before the ban goes live, even if the term doesn’t actually commence until after the ban is in force.

How does the ban actually work?

The basic premise is remarkably simple – upwards-only rent review clauses in affected leases will have no effect. This applies whether the rent review is linked to market value, inflation or turnover.

The ban doesn’t just apply to rent reviews that occur during the term. Similar provisions will also disapply upwards-only provisions when setting the initial rent for a renewal lease pursuant to an agreement or option with the existing tenant entered into on or after 17 March 2026.

Tenants will also be given the right to trigger and progress a scheduled rent review where the lease reserves these rights to the landlord alone. This will prevent landlords seeking to circumvent the ban by denying tenants the ability to take advantage of a rent review where the rent is likely to decrease.

What about subleases?

The amendment mentioned above that brings leases within scope where the tenant is not occupying means that the ban will apply to a headlease granted after the commencement date, even where the underletting is of whole and the head tenant is not occupying any of the premises.

An underlease granted after the commencement date will also be caught, subject to the possible exclusion for leases granted pursuant to pre-commencement arrangements.

There is however potential for the head tenant to face a shortfall, in circumstances where the headlease pre-dates the ban (so that upwards-only provisions take effect) but the underlease is granted after the commencement date and so is subject to the ban.

Furthermore, where the headlease is not subject to the ban and its terms require any underlease to include upwards-only provisions, the new legislation modifies the headlease so as to permit the underlease to include any rent review terms (compliant with the ban) that the head tenant and the undertenant may agree.

So, what is allowed going forward?

Traditional open market rent reviews will continue to be allowed, but must operate on an upwards-and-downwards basis. Landlords and tenants must be prepared for an increase in fully-contested rent reviews, as tenants in falling markets will now fight for a reduced rent rather than signing it off at ‘nil increase’.

Index-linked rents will also continue to be permissible. And since the legislation only nullifies clauses that require the rent to be higher than the formula would otherwise provide, caps do not obviously offend the legislation. Collars are more problematic, and the government has promised a consultation on caps and collars before the ban is implemented.

But even if the outcome of that consultation is that collars are not consistent with the new regime, it is so rare for an index-linked rent to fall that index-linked rents are effectively upwards-only anyway.

The government has also confirmed that a rent review to the higher of market rent and indexed rent will be permissible, provided neither limb is expressed to be upwards-only. This is probably the best position for a landlord, but is obviously subject to finding a tenant that will agree such a mechanism.

Another way of preventing rents from falling would be to agree stepped rents or fixed rent increases, although these may be difficult to predict at the outset for anything other than very short terms.

Can I still include an upwards-only clause, just in case?

Interestingly, the legislation does not actually prohibit the inclusion of upwards-only rent review clauses in new leases. It merely provides that such clauses will be of no effect.

Landlords may therefore prefer to continue including upwards-only provisions, in case the law is reversed during the term of the lease (or the lease subsequently falls outside the scope of the ban, possibly as a result of section 28 mentioned above). Well-advised tenants will of course resist them, for exactly the same reasons.

Need tailored advice on how the ban may affect your portfolio? Our Real Estate team is closely tracking the implementation of the English Devolution and Community Empowerment Act and advising landlords, tenants and asset managers on how best to prepare for the new regime. If you’d like to understand how the ban on upwards-only rent reviews could impact your leases, renewals or investment strategy, find out more about our Property Management expertise and how we can help.