Cast your mind back to July 10th 2025, when a new Bill was introduced to Parliament entitled the English Devolution and Community Empowerment Bill. What does that have to do with real estate? Not much — until you reach Schedule 31. Tucked away in Part 5, which is mostly concerned with devolving power to local authorities, lies an unexpected, proposed amendment to the Landlord and Tenant Act 1954.
What Is an Upwards-Only Rent Review?
Most commercial leases include a mechanism for periodic rent review. An upwards-only rent review can increase the rent or keep it the same — it can never reduce it.
Typically, these are open-market reviews that revise the rent to the higher of the passing rent and the market rent. If the market has fallen, the rent simply stays put. The aim is to protect landlord income. Upwards and downwards reviews exist but are rare. Upwards-only rent reviews were banned in Ireland in 2010, and some of the drafting of this Bill draws on lessons learned from that experience.
The New Bill
The Bill delivers Labour’s manifesto pledge to “bring a new dawn of regional power.” Most of it concerns devolution, but Part 5 directly affects commercial leases, with the accompanying press release heralding the change as “banning upwards-only rent review clauses in commercial leases which pit landlords against business and can make rents unaffordable and cause shops to shut.”
The ban applies in both England and Wales. The Government’s stated aims are to “make commercial leasing fairer for tenants, ensure high street rents are set more efficiently, and stimulate economic growth.”
Which Leases Will Be Affected?
The ban would be enacted by inserting a new Schedule 7A into the Landlord and Tenant Act 1954, and will apply where four conditions are met.
• The tenancy must be a ‘business tenancy’ — a commercial lease of more than six months where the tenant uses the premises for business purposes. This includes contracted-out tenancies. The Secretary of State may grant exemptions by regulation.
• The tenancy must be granted after the new Act comes into force — the ban is not retrospective.
• The tenancy must contain a ‘relevant rent review’ — one where the rent may change during the term and is not known or fixed at the outset. This broad definition encompasses open-market, indexation-linked, and turnover-based reviews. Leases with entirely fixed or stepped rents would fall outside this condition.
• The review method must involve calculating a reference amount and requiring the new rent to differ from it. Crucially, if that reference amount is lower than the current rent, the reviewed rent must fall accordingly — meaning the review must genuinely be capable of moving in both directions.
Is There a Way to Avoid This?
The Bill contains anti-avoidance provisions. Parties will not be able to use a put option requiring the tenant to take a renewal lease at the higher of the market and passing rents, nor can tenants be required to pay any shortfall between existing and new rents. In practice, the only reliable way to avoid the ban will be to complete leases before the new law comes into force.
Possible Impact and Parliamentary Progress
Industry professionals predict a shift towards shorter lease terms with stepped rents, greater use of landlord break rights, and contracted-out leases (which give the landlord more control), as well as more frequent indexation-linked reviews — raising concerns about lender confidence and investment appetite.
At the Commons Report stage, Ministers outlined further anti-avoidance measures to close loopholes, such as ensuring the ban applies even where a tenant has not yet occupied or has vacated and granting tenants a right to trigger a rent review so landlords cannot sidestep reviews during market downturns. The Bill is now at the House of Lords committee stage, with the core ban having survived both Commons Report and Lords Grand Committee.
Key Takeaways
For tenants, the proposed ban is welcome news. If enacted, rent reviews in new commercial leases will genuinely reflect market conditions, offering meaningful relief when values fall. For landlords and their lenders, the implications are more challenging. Guaranteed income growth can no longer be baked into lease structures, and the market is likely to respond with shorter terms, stepped rents, and more creative deal structuring.
Both sides should now be reviewing leasing strategies, and any landlord looking to lock in an upwards-only review would be advised to do so before Royal Assent. As legislation continues to evolve, close monitoring of its progress will be essential.
