Ban on upwards-only rent reviews: what it means for commercial landlords and tenants

The English Devolution and Community Empowerment Act 2026 introduces a significant change for commercial landlords and tenants, with a proposed ban on upwards-only rent reviews expected to shake up market norms.

The Act will apply to commercial leases in England and Wales (except for mining leases and leases of sites for electronic communications apparatus).

Where a lease is caught by the ban, any upwards-only wording in the rent review will be ‘of no effect’, meaning that rents on review can go down as well as up.

The commercial property industry eagerly awaits a government consultation and draft guidance on how the provisions will work in practice.  

Broadly, where the rent review wording in a lease says that the reviewed rent must be the higher of (a) the current (‘passing’) rent and (b) some other ‘reference amount’ (e.g. market rental value, or a prices index), then the amount of the passing rent will be ignored in the calculation. Clauses in superior leases requiring underleases to include upwards-only rent reviews will not be enforceable, even if the superior lease pre-dates the ban.

The Act received Royal Assent on 29 April 2026, but the ban itself is not yet in force. The Government has not confirmed an implementation date, although this is expected in late 2027 or 2028.

Generally speaking, leases granted before the legislation comes into force, or granted under agreements for lease entered into before the legislation comes into force, will not be caught by the ban, but that is not the end of the story.

In one important respect, the ban will be retrospective.  A lease will be caught by the ban if it is granted under an option to renew that was itself entered into on or after 17 March 2026.  

This is intended by the Government to prevent ‘options to renew’ being used as an avoidance tool.  

An ‘option to renew’ is an arrangement (referred to in the Act as a ‘tenancy renewal arrangement’) under which one of the parties to an existing lease (usually the tenant) can serve a notice on the other, requiring the grant of a new lease of the premises. The arrangement creates a (mutually-binding) agreement for lease at the moment at which the notice is served.)

Where parties have entered into leases or agreements for lease since 17 March 2026 that include options to renew, the ban may apply to rent reviews in any resulting renewal lease, including on day one. It may therefore be appropriate to review such arrangements in light of the proposed changes.

Clarification is expected to follow in relation to a number of areas of uncertainty, including:

• if (and how) the Act will apply where a lease containing rent review provisions is granted before the Act comes into force, pursuant to an option to renew entered into on or after 17 March 2026;
• rent reviews involving more than one ‘reference amount’. For example, if the rent is reviewed to the higher of market rent and any increase in inflation.  The Government has already informally indicated that, in this situation, the higher of the two figures will indeed prevail.  
• the use of caps or collars where the rent is index-linked. Again, the legislation is unclear.

Views on the likely impact on the ban are mixed. Some anticipate a shift in market practice.  Others point to the experience in Australia, the United States and Japan, where similar approaches to rent review are already the norm. In Ireland, a comparable change in 2010, led to a two-tier market but this was relatively brief while participants adjusted to the changes.

Many predict that the ban will hasten the trend towards ever shorter leases, with fixed rental increases (‘stepped rents’) and fewer, if any, rent reviews.  In the retail sector, turnover rent leases may once again grow in popularity, although any ratcheting of the underlying base rent will no longer be possible.

There is also a concern amongst those advising tenants that landlords will be looking to maximise initial rents and will therefore be less likely to offer rent free periods, fitting out contributions and other inducements.