Key takeaways
Major reform to commercial leasing
Landlords will be banned from using upwards only rent reviews.
Significant impact on development viability
Loss of UORRs may reduce funding confidence and new projects.
Market shift toward new rent mechanisms
Expect stepped rents, shorter leases, and more complex negotiations.
Ahead of his visit to MIPIM next month, Darren Hamer (Head of our Manchester Real Estate team) considers some of the big issues currently affecting the real estate sector, starting with the proposed ban on upwards-only rent reviews in commercial leases.
Introduction
Upwards-only rent reviews (UORR) have long been a defining feature of commercial leases in England and Wales. In July 2025, the UK Government proposed a ban on UORRs in new commercial leases and lease renewals through provisions in the English Devolution and Community Empowerment Bill. This is one of the most significant proposed interventions in the commercial property market in a generation.
What is being proposed?
Under the current proposals, UORRs would be prohibited in new commercial leases and lease renewals. The ban would apply to rent review mechanisms where the reviewed rent is not known or determinable at the outset, including open market, index-linked and turnover-based reviews. Existing leases would not be affected, and stepped or fixed rent increases agreed at the start of the lease would remain lawful. Broad anti-avoidance provisions would prevent landlords from reintroducing UORRs by alternative drafting techniques.
Whilst this is not the first time that UORRs have come under attack, previous proposals to ban them have never got this far and it looks like this time it will actually happen. The Bill is expected to become law later in 2026 and then implemented in 2027/2028.
Impact
The proposed ban on UORRs represents a profound shift in UK commercial leasing practice. Its potential benefits lie in increased fairness, flexibility and support for occupiers during economic downturns. However, the risks - particularly to investment confidence, property valuations and development viability - are significant. Whether the reform achieves its policy aims will depend on how the market adapts and whether secondary legislation introduces meaningful exceptions.
The Government believes that a prohibition on UORRs will assist occupiers, particularly retail and leisure occupiers. However, unless the market adapts, viability of development will become increasingly challenging and an unintended consequence of a prohibition on UORRs could be a reduction in growth and development as a result of commercial real estate development not taking place.
Development funding relies on projected rental growth over the lease term. Without UORR, lenders will be even more cautious, particularly for speculative schemes. This could constrain development activity at a time when regeneration and new commercial stock are already under pressure from construction costs and planning delays. For example, office development is already very challenging to fund on grounds of viability, despite the fact that very limited supply of newly-built Grade A office developments in Central Manchester leads to agents predicting very good rents if developments came forward.
Future
We expect the market to adapt rather than collapse. Alternatives to UORRs are likely to become more common, including pre-agreed stepped rents, index-linked reviews (which in practice are unlikely to ever fall, even without a collar) and shorter leases with more frequent reviews. While these mechanisms can replicate some economic outcomes of UORRs, they may increase drafting complexity and transactional costs.
While the ban is intended to help tenants, landlords are likely to take defensive measures including increasing higher initial rents, shorter lease terms, more frequent landlord break rights, and increased use of fixed or stepped rent increases. These changes could reduce security of tenure and ultimately shift risk back onto tenants in different forms.
These approaches are particularly likely from landlords as their costs of managing their portfolios will certainly rise. Historically, they have been able to judge the market for themselves, conclude there is no growth and not waste their time and money on a rent review exercise that will ultimately yield a ‘nil increase’. They will not be able to take such approach in the future if there is scope for a tenant to reduce rents and so it is likely that alternatives to UORR are developed to avoid costs being incurred in going through a rent review process.
We also expect to see a rise in the work for the specialist rent review surveyor. They will be in demand from both landlords and tenants. Landlords will appoint them to defend the existing rental position or at least mitigate reductions in a way that such surveyor has never been instructed before. However, there will no doubt be specialists acting for tenants seeking to reduce rents and drive down operating costs in locations where the real estate market has declined, if not necessarily their revenue generated at the Property.
Historically, litigation around rent reviews has been relatively rare, but this may develop now.
The market could become volatile until it settles down and we expect to see leases start to change within the next year.
We’re counting down to Cannes and can’t wait to be back at MIPIM 2026!
An 11-strong team from across our UK offices will be attending, bringing together expertise in real estate, real estate finance, banking, construction and private client law.
We’d love to catch up with fellow professionals, have some great conversations and see how our legal expertise can help support your strategic goals. If you’re heading to MIPIM too, do get in touch.
