What will be the impact of the ban on Upward only Rent Reviews?

On 10 July 2025, the Government introduced the English Devolution and Community Empowerment Bill. While the Bill focuses on local government reform, it includes a measure that could significantly alter commercial lease structuring across England and Wales. If enacted, the Bill would ban upwards only rent review clauses in most new commercial leases. 

Upwards only clauses have long been a standard feature of commercial leasing in the UK. For investors, they offer rental certainty, support property valuations, and underpin many long-term lending arrangements. Their removal would represent a structural change in the market. 

Which leases would be affected? 

The proposed ban would apply to new business tenancies as defined in Part 2 of the Landlord and Tenant Act 1954. This includes premises occupied by tenants for the purposes of a business, whether they benefit from security of tenure. 

The restriction would apply to rent reviews where the reviewed rent is not fixed in advance. This includes reviews based on open market rent, notional rent, and indexation such as RPI or CPI, or tenant turnover. These mechanisms would only be permitted if the resulting rent could fall as well as rise. 

Lease renewals would be within scope unless granted under an agreement made before the new provisions come into force. Headleases where the tenant is not in occupation appear to fall outside the restriction. The legislation is not retrospective and would not affect existing leases. 

What will remain permitted? 

The Bill confirms that stepped rents, where future rent levels are agreed from the outset, are not affected. Index-linked reviews would remain lawful, provided there is no restriction on the rent decreasing. Government guidance also suggests that future regulations may introduce limited exceptions, for example where a lease is linked to a development. However, no further details have been provided at this stage. 

Put options and successive lease structures 

Schedule 7B of the draft Bill targets contractual mechanisms that could be used to bypass the restriction. This includes so-called put options, where the landlord has a right to require the tenant to enter a new lease. If the new rent under that lease is not fixed or known when the option is granted, it would be caught by the same prohibition. The effect is to prevent the use of successive leases as a workaround. 

New powers for tenants 

The Bill would also introduce a statutory right for tenants to trigger a rent review. If the lease reserves that right solely to the landlord, the tenant would be able to act in its place. This also applies to procedural steps such as disputes to arbitration or expert determination. The aim is to ensure that reviews still take place even where the landlord might prefer to delay or avoid a reduction in rent. 

Anti-avoidance provisions 

The Bill includes wide-ranging anti-avoidance wording. Any attempt to structure the lease or associated documents to replicate the effect of an upwards only review would be void. This includes placing the rent review terms in a side letter or deferring the agreement of rent terms to a later stage. Landlords would not be able to rely on drafting that only activates a review when it produces a higher rent. 

Why is the Government proposing the change? 

The Government has said the reform is intended to make commercial leasing fairer, ensure high street rents reflect market conditions, and support small businesses. Guidance accompanying the Bill argues that upwards only clauses inflate rents in weaker markets, reduce profitability for tenants, and contribute to long-term vacancy in town centres. 

Supporters of the reform point to market inefficiencies and a shift towards shorter lease terms, break clauses and turnover-based rents, especially in the retail and hospitality sectors. Critics have argued that the move risks undermining property valuations and deterring investment, particularly from institutions reliant on predictable income. 

Lessons from Ireland 

Ireland banned upwards only rent reviews in 2010. While initial concerns focused on falling values and reduced investor interest, the market adapted over time. A division emerged between pre-ban leases and newer leases allowing bidirectional rent movement. Shorter lease terms became more common, and many landlords adopted more flexible models. 

The UK proposal differs in scope and structure. It includes a broader range of mechanisms and incorporates stronger anti-avoidance measures. It remains to be seen whether similar market adjustments will follow. 

Impact on property investment strategy 

The removal of upwards only clauses may reduce the long-term income predictability investors have relied on, particularly in larger portfolios. For some, this may trigger a reassessment of capital values, financing arrangements and risk appetite. Investors may respond by favouring fixed stepped increases, shorter terms, or index-linked models. However, all these carry commercial trade-offs and are subject to the final wording of the legislation. 

Smaller landlords, who typically grant shorter leases, may be better placed to adapt, though many rely on consistent income to service lending. The ability for tenants to trigger reviews may create new dynamics in landlord-tenant negotiation and portfolio management. 

Next steps for investors and advisers 

The Bill is at an early stage and is likely to be subject to amendment. Industry bodies including RICS and the British Property Federation have already raised concerns. Further regulations may refine the scope or introduce limited exceptions. 

In the meantime, property investors should review lease documentation, lending covenants and assumptions on rental growth. Particular attention should be given to transactions currently under negotiation and any agreements for lease where timing may be relevant. 

This proposal, while not yet law, reflects a material shift in the legal and commercial foundations of commercial leasing. Whether it proceeds in its current form or is amended during its passage, it signals a change that property investors will need to plan carefully. 

Got questions about the bill and how it may affect you? Contact Claire-Elaine Arthurs for expert legal advice.