Ban On Upwards Only Rent Review – Time To Start Preparing For Change

Upwards Only Rent Reviews: What the ban means for commercial property owners and occupiers

In just under 10 months, the government has moved from the surprise introduction of a ban on upwards-only rent reviews (“UORRs”) in commercial leases, to passing the legislation which will implement the ban. The English Devolution and Community Empowerment Act 2026 (the “Act”) was granted Royal Assent earlier this week (29 April) and when the relevant provisions are brought into force, it will fundamentally change how rent review mechanisms can operate in commercial leases.

While the outright ban is not expected to come into force until 2028, the Act already has immediate implications for lease structuring, renewal options and transactions in progress. 

Section 102 and Schedule 36 of the Act insert new Schedules 7A and 7B into the Landlord and Tenant Act 1954, introducing a statutory ban on UORRs in leases granted after the ban comes into force. 

In simple terms, where a rent review mechanism would otherwise have the effect of preventing rent from falling, that “upward‑only” element will be disapplied. Once the Act comes into force, the revised rent could be upwards or downwards and will be calculated by using a formula set out in the Act. 

Although the ban will sit within the 1954 Act, its reach is broader. It will apply not only to protected business tenancies but also to contracted‑out leases and superior leases, whether or not the superior tenant is in occupation. 

The legislation targets rent review clauses that operate in two stages:

1. A reference rent calculated (typically) by reference to: 
   1. indexation or inflation;
   2. open market rent; or
   3. tenant turnover; and
2. A cap, collar or other mechanism is applied so that the rent cannot fall below a specified level or below the existing passing rent. 

This formulation captures the majority of traditional upwards‑only rent review clauses currently found in commercial leases.

Importantly, the Act does not ban all rent increases. Stepped rents, index‑linked rents and open market rent reviews without an upwards‑only component remain permitted, provided they do not include a second step that artificially prevents downward movement. 

The Government’s current indication is that the ban is unlikely to come into force before 2028. However, be aware that timing affects different arrangements in different ways. 

• Leases granted before commencement: UORRs will continue to operate for the full term of the lease.
• Agreements for lease entered into before commencement: these are treated as “protected pre‑commencement arrangements”, meaning that a lease completed after the ban begins (but pursuant to an agreement for lease entered into prior to implementation of the ban) may still include and operate UORRs.
• Rights of first refusal or pre‑emption rights: rights granted before commencement are similarly protected, allowing UORRs to appear in leases granted pursuant to those rights even after the ban begins. 

A key feature of the ban is its treatment of renewal options and renewal arrangements.

Where a renewal option or contractual renewal arrangement was entered into on or after 17 March 2026, the ban will apply to the renewal lease once it is granted and the ban has come into force. This is the case even if the original lease itself is entered into before the legislation comes into force. 

As a result:

• UORRs may continue to operate during the initial lease term; but
• UORRs will be unenforceable in the renewal lease if the renewal arrangement was agreed on or after 17 March 2026.

This has immediate implications for how renewal options are drafted and when they are agreed as part of wider transactions.

Whilst there are still some questions to be answered as to possible exemptions from the ban, landlords and tenants now have some certainty as to how the ban will operate and can begin to assess some alternative deal structures including granting longer original leases with upward‑only reviews and negotiated break rights instead of renewal options, or the use of reversionary leases, rather than options to renew.

Higher risk structures include renewal options that require the renewal lease to contain UORRs, whether on day one or at future review dates.  Given the presence of broadly drafted anti-avoidance provisions in the Act, arrangements such as these may be vulnerable to challenge in the courts, and parties should take specific legal advice before entering into them.

For landlords and investors, the ban will require a rethink of how rental growth and value protection are achieved, particularly in long‑term income‑driven assets. Portfolio documentation, precedent clauses and asset plans may all need updating to reflect a future without UORRs in new and renewal leases.

For occupiers, the reforms may offer greater protection against rent increases at review, but they also introduce additional uncertainty into lease negotiations and renewal planning, particularly where options were expected to “lock in” rent levels.

The ban also affects subletting. Where a superior lease was granted before commencement, any provision in that lease purporting to require an underlease (granted after commencement) to contain an UORR will be ineffective. 

Although the implementation of the ban itself is still some way off, the message is clear: this is no longer a future problem.

Landlords should:

• review templates and playbooks to ensure they do not assume the continued availability of UORRs;
• audit renewal options and renewal arrangements entered into on or after 17 March 2026; and
• consider alternative rent structures in pipeline transactions to avoid unintended unenforceability at a later stage.

The Government has promised further consultation on the treatment of caps and collars to "balance tenant protection with investor confidence" with further guidance also keenly awaited. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.