The English Devolution and Community Empowerment Act 2025 has received Royal Assent – bringing with it a potential ‘ban’ on upwards-only rent reviews nears – looking set to trigger a complete overhaul of commercial leasing processes.
If brought into force, the ban is expected to trigger a fundamental change in the way UK commercial leases are structured, negotiated, and valued; with significant implications for landlords, tenants, and investors alike.
The English Devolution and Community Empowerment Act (the Act) has now received Royal Assent, although secondary legislation will be needed to enforce the ban on upwards-only rent views.
Once the relevant sections of the Act are in force, it would spell the effective ‘banning’ of upwards-only rent reviews for commercial leases – in turn presenting pertinent changes for how commercial leases are drafted and negotiated.
The new rules will apply primarily to newly-granted business leases where both Element 1 (referring to the amount of rent (the Reference Amount) being determined by reference to an index or multiplier, the actual rent, a hypothetical market rent, or a turnover amount), and Element and 2 (when the new passing or reviewed rent are different from the Reference Amount), and either:
a new passing rent is not known or specified on an existing rent review (in other words, it is subject to an external factor and cannot be determined when the lease is granted); or
where existing leases are varied after the ban in the Act comes into force so that they do not specify a new passing rent.
It is usual to see terms in commercial leases which allow for rents to be reviewed so they are the highest of the existing rent or the new rent that was calculated by reference to an index or multiplier. This ensures a minimum baseline of rent that can either stay the same or increase. It is uncommon to see rent review provisions that allow rent to decrease.
The consequence of a newly-granted lease or relevant variation incorporating the above is that rent reviews cannot result in a rent higher than the Reference Amount.
Any rent review mechanism which does prescribe a rent higher than the Reference Amount will be rendered ineffective by the new legislation – resulting in the rent instead being set at the Reference Amount.
Accordingly, the changes not only look set to have the effect of banning ‘upwards-only’ rent reviews – but could also culminate in a reduction of the rent payable.
Terms which allow for rent to go both up and down at the relevant review date will be accepted, along with stepped fixed rents. Caps on rent reviews are also permitted.
Existing leases granted before these provisions come into force will be unaffected, provided that any variation does not fall into the above category.
A recent amendment to the Act does, however, introduce a retrospective element: all tenancies granted via a tenancy renewal arrangement which was entered into on or after 17 March 2026 will be caught by the new rules proposed under the Act. This mechanism is devised to catch any kind of arrangements for future leases, whether or not they would be regarded as a contract.
Upwards-only reviews are the cornerstone of how property assets are valued; the proposals will change the complexion of the property investment market. While the government’s intentions appear to be limited to trying to address the vacant retail units, the impact of proposals will be much more widespread – covering sectors other than just retail.
This could result in the adoption of shorter leases without the ability for the tenant to renew pursuant to the 1954 Act. Stepped rent increases and indexed linked reviews which allow for the rent to go up and down will inevitably rise in popularity. There will likely be a knock-on impact on other commercial terms in such arrangements
There is also an indication that the government will look to introduce further guidance permitting landlords to rely on two or more Reference Amounts, so long as the calculations allow the Reference Amounts to both increase and decrease.
It is unclear what the timeline will be before the ban becomes legally binding but it will not take immediate effect now the Act has passed. The government has indicated an intent to consult on permitting the inclusion of collars in rent review clauses. These agree a maximum decrease in the rent and are usually seen with caps to the maximum increase for fairness between parties. This consultation will no doubt push back the introduction of the ban, but it may not push back the introduction of the retrospective element covering renewal arrangements, which could become retrospectively binding much sooner.
The Act is now law, but the ban is still pending – signalling change for the way in which the commercial property sector negotiates and deals with rent reviews.
Most newly-granted commercial leases, options to renew, and any variations around rent to existing leases will be caught by these provisions, so it is paramount to get on top of these changes early to ensure a smooth transition if (or when) the ban under the Act comes into force.
The government have confirmed that further guidance will be given before the ban takes effect, but parties should be looking at lease structuring and drafting now to be prepared.
- Landlords may face immediate exposure on tenancy renewal arrangements.
- Drafting may be more complex in the short term while parties grapple with the proposals.
- Existing leases entered into before the commencement will generally be exempt.
- The requirement of upwards-only rent reviews as a condition of being able to sublet will also be affected.