The Move Away from Upwards-Only Rent Reviews: What It Means for Commercial Property

For many years, upwards-only rent review clauses have been a cornerstone of commercial leases in England and Wales.

They have provided landlords, investors and lenders with a dependable level of certainty: rent could rise at review but never fall.

That long-standing position is now under review.

Recent legislative developments indicate a clear shift in government policy, with proposals to prevent the use of upwards-only rent review mechanisms in commercial leases.

What Are Upwards-Only Rent Reviews?

An upwards-only rent review is a lease provision which allows rent to increase or remain unchanged at review but not decrease - even where market conditions have softened.

From a landlord’s perspective, this has traditionally supported predictable rental income and stable investment valuations.

However, tenants have often viewed these clauses as inflexible, particularly during economic downturns when market rents may decline.

In such circumstances, businesses can find themselves tied to rents above current market levels.

There is also a wider commercial impact, as these provisions can make assignment or subletting more difficult, especially where incoming tenants are unwilling to take on above-market rental commitments.

Proposed Legislative Reform

The English Devolution and Community Empowerment Act 2026 (https://www.legislation.gov.uk/ukpga/2026/23/enacted)  introduces measures intended to restrict the use of upwards-only rent review clauses in commercial leases.

Although the relevant provisions are not yet in force, the direction of travel is clear.

Under the proposed framework:

• Upwards-only rent review provisions in new and renewal business tenancies will be ineffective once the legislation is implemented
• The rules will apply broadly to leases capable of falling within the Landlord and Tenant Act 1954, including those contracted out
• Rent review provisions must allow for both increases and decreases, ensuring rents more accurately reflect market conditions

Certain rent structures will remain unaffected. For example:

• Stepped rents and fixed increases, where rent levels are agreed at the outset
• Index-linked rents, provided they allow for downward movement as well as increases

The legislation is also expected to include measures preventing parties from avoiding the new rules through drafting techniques or superior lease structures.

Timing And Areas Of Uncertainty

At present, the reforms have not yet come into force, and no firm commencement date has been confirmed. Early indications suggest implementation is unlikely before 2027, with the possibility of a later start depending on further consultation.

There are still key points to be clarified, including:

• Whether certain specialist leases (e.g. agricultural or mining) will be excluded
• How rent review caps and collars will be treated
• How the rules will interact with statutory lease renewals

Impact on Existing Leases

Importantly, the reforms are not expected to apply retrospectively in most cases. Existing leases containing upwards-only rent review clauses will generally continue as agreed.

However, there is an important exception. Renewal arrangements agreed after mid-March 2026 may fall within the scope of the new regime once implemented. This means that parties currently negotiating leases with renewal options should already be considering the potential future impact.

Likely Changes to Market Practice

Even before the legislation takes effect, market behaviour is beginning to adapt. If landlords can no longer depend on rent increases at review, alternative approaches are likely to emerge.

We may see:

• Shorter lease terms, enabling more frequent open market resets
• Greater use of fixed or stepped rental increases
• Increased adoption of genuinely flexible index-linked reviews
• Wider use of turnover rents, particularly in retail and hospitality
• More detailed negotiation of break rights and review frequency
• Potentially higher initial rents, to offset future uncertainty

These changes could also affect how valuers assess property income and investment strength, particularly as the distinction between “old” and “new” lease structures becomes more pronounced.

Practical Considerations for Landlords And Tenants

Although implementation is still pending, this is not an issue to ignore. Parties negotiating leases now should be factoring in how the new rules may influence future arrangements.

Landlords may wish to:

• Review template lease terms and rent review provisions
• Consider alternative strategies for maintaining income stability
• Assess the potential impact on financing and asset valuation
• Explore re-gearing opportunities in existing leases

Tenants, on the other hand, may:

• Seek greater flexibility in long-term commitments
• Use the changing landscape to negotiate more balanced rent review terms
• Revisit renewal options and future leasing strategy

Looking Ahead

The proposed restriction on upwards-only rent reviews represents a significant evolution in the commercial leasing landscape.

While details are still being refined, the policy objective is clear: to create a more balanced framework that better reflects prevailing market conditions.

For landlords, tenants and property professionals alike, early preparation will be key.

Understanding how lease structures may need to evolve—and taking advice at the negotiation stage—will help ensure that arrangements remain both commercially viable and legally compliant.

Speak to Our Commercial Property Solicitors

At Bennett Griffin, our experienced commercial property solicitors (https://www.bennettgriffin.co.uk/with-your-business/commercial-property-law-solicitors/)  support landlords, tenants, investors and businesses with clear, practical advice on commercial leases, lease renewals and wider property matters.

Based in Worthing and Chichester, we work with clients across West Sussex and beyond, helping them understand their options and make confident commercial decisions.

If you are negotiating a new lease, reviewing existing lease terms or considering how these changes may affect your property portfolio, please contact our Commercial Property team.

Call us on 01903 229999 or 01243 781000 today. Alternatively, email info@bennett-griffin.co.uk and a member of our team will get back to you shortly.

We will be happy to guide you through your options in a clear and practical way.