The end of upwards- only rent reviews?

The English Devolution and Community Empowerment Act 2026 :

In recent years, there has been political pressure to “level the playing field” between corporate landlords and smaller “SME” tenants.

In an effort to encourage a more risk-sharing approach to lease agreements, the Government recently announced Royal Assent had been given to the English Devolution and Community Empowerment Bill. The provisions of the Act signals the end to upwards-only rent review in commercial leases.

It is important to note that the ban is not yet in effect but what could this mean for leases in the future?

Who will be affected? 

When the provisions of the Act come into effect, any mechanism within a commercial lease which means that rent may only increase will be prohibited and unenforceable.

 The agreements that will be affected:

·         All new leases entered after the ban comes into effect (unless they are entered into pursuant to an agreement made before the ban is in force).

·         Renewals of existing tenancies where the renewal arrangement was made on or after 17 March 2026.

·         Sub-lettings from pre -existing leases.

·         The Act will only apply to leases in England and Wales.

The following agreements are likely to be excluded from the ban:

·         Tenancy renewal arrangements entered before 17 March 2026

·         Reversionary leases entered prior to the ban coming into force (potentially even if entered after 17 March 2026).

 Parties will not be able to “contract out” of the ban. 

How will rent reviews work?

After the Act is in force, upwards only rent reviews will not be permitted even on renewals that should be granted on “substantially the same terms”.

The distinction the Act will draw is whether the rent would be ascertainable at the time the lease is granted and if the lease could decrease as well as increase. Fixed stepped rents or rents linked to turnover or CPI/ RPI which can rise or fall are likely to remain valid.

The future

It is expected there will be consultations as to the implementation of some provisions as well as the transitional arrangements meaning implementation is unlikely to happen before 2027. Consultation topics are likely to include whether “cap and collar” arrangements (i.e. rent between a fixed minimum and maximum) will be permitted.

There is no timeline currently for when the ban will come into force but may have retrospective effect from arrangements from 17 March this year.

What now?

Existing leases appear to be protected from the ban for the time being but caution should be exercised when negotiating renewal options, sub letting requirements and agreements for lease that may remain conditional for some time. Consideration should also be given to value of future investments and sale and leaseback structures to ensure they remain viable without guaranteed rent increases.

Tenants would be well advised to resist long term upward only review terms which are likely to be outdated in the near future. Landlords should consider reviewing their upcoming review dates and lease precedents.

 If you would like advice on lease agreements then please do contact a member of our Commercial Property team on 0333 577 2250.