Justin Lewis-Vivas
- Partner
- Real Estate
Upwards-only rent reviews – preparing for a fundamental change
The English Devolution and Community Empowerment Act received Royal Assent on 29 April 2026 (“Act”), introducing a ban on upwards-only rent reviews (“UORRs”) in commercial leases. Although the ban is not yet in force, it represents a significant shift in the allocation of risk in commercial leasing. The legislation is already influencing lease negotiations and asset planning, particularly where renewal options are involved.
KEY TAKEAWAYS
- Legislation banning UORRs is now in place, with commencement expected in 2027 or 2028.
- The ban will not apply to existing leases, subject to important exceptions.
- A retrospective element applies to certain tenancy renewal arrangements entered into on or after 17 March 2026.
- The changes already have practical implications for lease negotiations and asset planning.
WHEN WILL THE BAN TAKE EFFECT?
The relevant provisions will be brought into effect by secondary legislation. The commencement date has not yet been confirmed but current market expectations point to implementation in 2027 or 2028.
Further consultation on how the regime will operate is expected before it goes live. In particular, the treatment of capped and collared reviews has yet to be confirmed. While the Government has indicated that this will be consulted on, the scope of any permitted exceptions –and the timing of that process –remains uncertain.
WHAT TYPES OF RENT REVIEW ARE CAUGHT?
The ban targets rent review mechanisms where:
- The rent can only go up, and;
- The potential increase is not known or ascertainable at the date the lease is granted.
As a result, the ban will typically apply to open market rent reviews, index linked reviews and turnover-based reviews where these are on an upward-only basis.
By contrast, stepped rents and fixed uplifts (where the increases are pre-determined) are permitted. True upwards/downwards reviews are also permitted. The Government has indicated that further guidance will clarify the position on hybrid mechanisms, such as a review to the higher of open market and index-linked rent.
Where a rent review is caught, the upwards-only element will be unenforceable. As such, if the rest of the review mechanism produces a lower rent, the reviewed rent will be reduced to that lower figure.
WHICH LEASES ARE AFFECTED?
The scope of the ban is broad – it applies to all business tenancies (even those contracted out of the security of tenure provisions of the Landlord and Tenant Act (“1954 Act“)), whether or not the tenant is in occupation at the time of the review.
The key distinction is timing. Once in force:
- Existing leases will not be affected.
- New leases to new tenants (i.e. not renewals) granted after the commencement date will be caught, unless they are entered into pursuant to a pre commencement agreement for lease or option.
THE RETROSPECTIVE ELEMENT – RENEWAL ARRANGEMENTS
One of the most notable features of the legislation is its retrospective reach in relation to lease renewals.
Once in force, where a lease is granted to an existing tenant after the commencement date pursuant to a “tenancy renewal arrangement” completed on or after 17 March 2026, the ban will apply both:
- To the rent payable on the first day of the renewal lease.
- To any rent reviews during the renewal term.
Tenancy renewal arrangements are those under which an existing tenant can require the landlord to grant a new tenancy or be required by the landlord to take a new tenancy (i.e. put and call), whether contained in an existing lease or documented separately.
Crucially, this aspect of the legislation is relevant now, even though the ban is not yet in force, because it may change how options are structured. However, reversionary leases granted before the commencement date appear to fall outside this retrospective provision, even where the term begins after the ban takes effect, although further guidance will be needed to confirm this.
SUBLEASES
Once the ban is in force, any requirement in a superior lease for subleases to contain UORRs will cease to have effect. This applies whether the superior lease was granted before or after the commencement date.
As such, a post-ban sublease could contain a different rent review structure from a pre-ban headlease, creating the potential for rent mismatch and income shortfall for the intermediate tenant.
PROCEDURAL CHANGES IN FAVOUR OF TENANTS
The Act also introduces a procedural change to rent review mechanics. Once in force, tenants will have the right to trigger reviews and enable them to operate effectively, even where the lease originally granted those rights only to the landlord. This reduces the scope for rent review timetables to be controlled or deferred by landlords in a falling market.
NO CONTRACTING OUT AND ANTI-AVOIDANCE
The parties cannot contract out of the ban. Moreover, the legislation includes anti avoidance provisions aimed at preventing arrangements which seek to replicate the economic effect of an upward-only review, such as side arrangements requiring rent top ups where a rent has been reviewed downwards.
WHAT SHOULD LANDLORDS AND TENANTS BE CONSIDERING NOW?
Although the ban is not yet in force, parties considering lease arrangements now should be alive to its potential impact. Renewal options entered into since 17 March 2026 warrant particular attention, given the legislation’s retrospective effect in this area.
UORRs in leases completed before the ban takes effect will be unaffected. In the near term, this may influence how transactions are structured, including greater focus on longer initial lease terms or reversionary arrangements.
Looking further ahead, the market is expected to adapt. As UORRs fall away from new leases, alternative rent structures are likely to become more common. These may include stepped or fixed uplifts, index-linked mechanisms that can move up or down, shorter lease terms with no review or different approaches to incentives and break rights.
Ahead of the commencement date, landlords and tenants may want to reconsider the rent review provisions in underleases.
The period between now and commencement introduces further uncertainty. In particular, the expected consultation on capped and collared reviews may alter how parties factor the ban into their deals.
Overall, tenants may benefit from increased downside protection if market rents fall, while landlords will assume a greater share of rental risk. For both sides, early engagement and careful structuring will be key to managing the changes.
WHAT NEXT?
We will continue to monitor the progress of the legislation, consultation and guidance as they emerge. If you would like to discuss what these changes could mean for your business or future transactions, please get in touch with a member of the team.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
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Uriel Newman
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- Occupier Services
