Are you a commercial landlord with leases that are due to expire in the next couple of years?
If so, it may be in your interest to negotiate an early renewal with your tenant, to avoid the upcoming ban on upwards-only rent review clauses in business leases.
Upwards-only rent review clauses have traditionally been a common feature in commercial leases. These clauses ensure that the rent payable after a review cannot fall below the current rent, even if market conditions would dictate a lower rent. While this provides landlords with financial security and protects the value of their assets, it can result in tenants paying above-market rents in a declining rental market.
Due to recent legislation this is about to change. The English Devolution and Community Empowerment Act 2026, which gained Royal Assent on 29 April 2026, provides that any variable rent review mechanism preventing rent from falling below a minimum level will be unenforceable.
When does it take effect?
Although the Act has been passed, the ban on upwards-only rent reviews has not yet commenced. This will be set by regulations and is expected to come into force sometime in 2027 or 2028. In the meantime, existing leases containing upwards-only rent review clauses will remain valid until their expiry.
Who will it apply to?
It will apply to new and renewal business tenancies (including mixed use tenancies) with variable rent reviews (e.g. linked to the open market/index-linked/turnover reviews) which are entered into after the ban takes effect. Stepped rents or fixed rents are unaffected.
The following will not be caught:
- Leases granted before the ban comes into force;
- Leases which are granted pursuant to an Agreement for Lease entered into before the ban comes into force (despite the lease commencing at a later date);
- Reversionary leases with an effective date before the ban comes into force (despite the lease commencing at a later date).
Will it apply retrospectively?
Renewal leases are caught where the renewal is pursuant to an option contained in an agreement/lease dated on or after 17 March 2026.
Any other considerations?
The Act also introduces a statutory right for a tenant to trigger a rent review, even where the lease provides that only the landlord may do so. This enables tenants to benefit from falling market rents and stops landlords from only triggering reviews that will result in higher rents.
There are also stringent anti-avoidance provisions, so parties cannot contract out of these provisions or subsequently amend the rent review to upwards-only.
Are there any unknowns?
As well as the actual date on which this will come into force, we await further guidance from the government on the position with cap and collars, and whether the higher of two upwards/downwards review mechanisms will be permitted (i.e. the rent being reviewed to the higher of the open market or index-linked).
How Can We Help?
To discuss your position and how you might benefit from early renegotiation please get in touch with a member of our Commercial Property Team. Call us on 01743 248545, or send an email to [email protected]. You can also use our Contact Us form.
