The government has announced a significant reform to commercial property law in England and Wales. As part of the English Devolution and Community Empowerment Bill, upward-only rent review clauses will be banned in new commercial leases, marking a substantial shift in landlord–tenant dynamics.
What Are Upward-Only Rent Reviews?
These clauses, long standard in commercial leases, stipulate that rent can either increase or remain static at review, never decrease, even where market conditions warrant a reduction. While they offer financial certainty for landlords, tenants have often found themselves locked into above-market rents, particularly in areas experiencing economic decline.
The proposed legislation will prohibit the inclusion of upward-only clauses in new lease agreements. Going forward, landlords will be required to offer either fixed rents for the duration of the lease or incorporate review provisions that permit rents to fall as well as rise. Importantly, the ban will not affect existing leases.
Policy Objectives
The government’s stated aim is to create a fairer and more flexible commercial leasing environment. The reform is targeted at addressing high vacancy rates on high streets and supporting small businesses by enabling them to negotiate rents that better reflect current market conditions.
By removing restrictions that artificially maintain inflated rents, the government hopes to facilitate business continuity, attract new tenants, and reinvigorate commercial centres. The policy sits alongside broader regeneration measures, including high street rental auction powers introduced in 2024, which allow local authorities to let long-vacant properties through short-term lease auctions.
Legal and Commercial Implications
This reform represents a significant departure from long-established leasing practice and will have important implications for landlords, tenants, and advisors.
Landlords entering into new leases will need to review their standard lease templates and rent review mechanisms to ensure compliance. Careful consideration will also be required in structuring rent review clauses to balance flexibility with financial viability.
For tenants, particularly SMEs, the reform may offer a welcome opportunity to negotiate more sustainable rent terms and avoid being tied into unfavourable agreements as market conditions fluctuate.
Although the ban applies only to new leases, its broader impact on market expectations, valuations, and negotiations may be felt more widely over time. Investors and lenders may also reassess their risk profiles in light of potentially less predictable rental income.
Looking Ahead
The proposal was not included in Labour’s 2024 election manifesto but reflects long-standing policy debate around commercial rent flexibility. Its inclusion in the current bill signals a renewed focus on tenant protection and high street revitalisation.
We will continue to monitor the progress of the legislation and its potential implementation timeline. In the meantime, landlords and tenants should begin preparing for the likely shift in commercial lease structuring.
For advice on how these proposed changes could affect your lease negotiations or property portfolio, please contact our Commercial Real Estate team.
About the Author
Ruairidh McKillop is a Scottish-qualified commercial real estate solicitor at RIAA Barker Gillette (UK).
Based in the firm’s Central London office, he advises on acquisitions, sales, leasing, and development projects across a wide range of property types. Ruairidh has particular expertise in rural estates and renewable energy assets and works closely with Partner and Head of Commercial Real Estate, Brinda Granthrai.