The end of upwards-only rent reviews?

• The government has proposed banning upward-only rent reviews in new commercial leases in England and Wales, allowing rents to move both up and down with the market.
• Existing leases are untouched, but any new commercial lease caught by the legislation will not be able to lock in a ratchet that prevents rent from falling at review.
• The reform will push landlords and tenants towards alternative structures such as index-linked rent, open-market reviews without collars, and stepped rents.
• Lease negotiations will increasingly focus on break options, review timing, and cash flow volatility, with investors rethinking how they price and hold assets.
• Both sides will need to stress-test income and outgoings under different rent paths and treat rent review as a genuine risk-allocation exercise rather than boilerplate drafting.

On a wet July morning in Westminster in 2025, a short clause buried in the English Devolution and Community Empowerment Bill did something that decades of market commentary had failed to do: it put the future of upwards-only rent reviews on the chopping block.

The Government’s intention is plain. Upwards-only clauses, Ministers argue, keep tenants locked into above-market rents even after a downturn, contribute to the decimation of England’s high streets, and make it harder for small businesses to survive. Their solution was simple in concept and radical in consequence: new commercial property leases in England and Wales would no longer be allowed to contain rent review mechanisms that move in only one direction.

What is the proposed ban on upwards-only rents?

The Bill targets rent review provisions in new commercial leases where the rent at review is not fixed on day one but is set by a formula or comparison, such as open-market rent reviews or index-linked reviews. If the reference figure at review is lower than the current passing rent, the rent must fall to that figure. Any attempt to preserve a floor that stops rent dropping would be ineffective.

The scope is broad. It would catch all new business leases, whether or not they have security of tenure under the Landlord and Tenant Act 1954, and renewal leases granted after the legislation comes into force. Anti-avoidance measures are drafted widely. A rent collar that, in substance, sets a minimum rent, or a convoluted put option that forces a tenant into a higher rent, would not survive scrutiny.

Two important comfort points emerge. First, the ban is not retrospective. Existing leases, with their carefully negotiated upwards-only reviews, remain untouched. Secondly, fixed or stepped rents, where future rent levels are pre-agreed rather than contingent, sit outside the regime. Knowing how tough landlords and lenders have had it over the past five years, these structures will become extremely attractive.

How rents start to move both ways

For tenants, the benefit of true upwards or downwards reviews is obvious. If the market cools, rent can come down at review rather than remaining frozen at a historic peak. In policy terms, that is framed as a way to support business resilience and encourage more realistic high street rents.

For landlords and institutional investors, the picture is more complicated. Property values in the UK have long been underpinned by the assumption that rental income ratchets upwards over time and never retreats mid-term. If rents can fall, the cashflow profile of a long lease becomes more volatile. Lenders may apply different covenants. Pension funds and overseas investors may mark down assets that no longer offer the same predictability.

I have already seen behavioural shifts prompted by these tensions. Landlords are asking for shorter leases, higher headline rents, and tighter rent-related clauses within the lease agreement.

Alternatives to upward rent reviews

If upward-only reviews are off the table, parties will turn to other tools. Three are likely to dominate negotiations.

Index linked reviews
Simple indexation to CPI or RPI is not affected in the same way if the clause does not prevent downward movement in real terms, although index-linked reviews with collars that block nominal falls are squarely in the firing line. For landlords, indexation offers a degree of predictability and a hedge against inflation. For tenants, it can feel acceptable if the index is familiar, transparent and capped at a sensible level. The drafting conversation will focus on which index to use, how often to review and whether any cap is compatible with the new rules.

Open market reviews without collars or floors
Traditional open market reviews remain viable as long as the new rent can go down as well as up. Here, the negotiation shifts to valuation assumptions: hypothetical term length, rent-free periods, and the treatment of incentives. With genuine two-way movement, both landlord and tenant have skin in the game at review, and expert determination clauses may be invoked more often.

Stepped rents and hybrid structures
Because stepped rents sit outside the ban, landlords may respond by stipulating a series of fixed increases during the term. The price of certainty is that the parties must take a view on the market years in advance. Some will experiment with hybrids: modest stepped increases combined with periodic market checks, or a capped index-linked uplift that operates only within a band agreed at the outset.

Each of these options carries trade-offs. As a Commercial Property Law Solicitor, my role is to explain the risks if the new law on upwards rent reviews comes into force and to advise landlords on the best option, taking into account their wider portfolio, exposure to financial risk, and desired ROI.

The impact of break clauses

If rent can fall as well as rise, break clauses take on a slightly different role. Landlords who fear a softening market may seek to bring leases to an end before a review date that would otherwise ratchet down rents. Tenants, conversely, will be keen to preserve rights to walk away if a review produces a rent that still feels unaffordable or if their own trading position has deteriorated.

You can already see the pressure points.

• The alignment between review dates and break clause triggers/dates will be closely examined.
• Conditions for operating break clauses, including rent payment and compliance, will be scrutinised more sharply.
• Institutional landlords may favour landlord-only break clauses in sectors with the greatest income volatility, while stronger tenants will push for mutual break clauses to manage their risks.

In anticipation of the end of upward rent reviews, I am modelling different combinations of lease terms, rent reviews, and break clauses so my clients can make informed decisions about the alternatives to upward rent reviews listed above and how to use break clauses strategically to mitigate risks.

I will continue to update the legal position of upward rent reviews as the law develops.

FAQs

Does the proposed ban affect existing commercial leases with upwards-only rent reviews?
No. The proposal is not retrospective, so existing leases and agreements for lease entered into before the law comes into force will continue to operate as drafted.

Will the new rules catch all types of rent review?
The focus is on review mechanisms where the rent is unknown at the outset and cannot fall under the clause, such as market reviews and index-linked reviews with collars that prevent downward movement.

Are stepped rent provisions still allowed?
Yes. Fixed or stepped rents, where future increases are pre-agreed rather than calculated by reference to an external benchmark, remain outside the ban as currently drafted.

Will the reforms apply across all sectors or just retail?
Although the political narrative has centred on high streets, the draft legislation applies broadly to new commercial leases where premises are occupied for business purposes, across sectors including offices, logistics and other uses.

What should landlords and tenants do now while the Bill is still going through Parliament?
Parties entering into leases that may complete after the commencement date should factor potential changes into the heads of terms, consider whether stepped rents or compliant review clauses are appropriate, and run cashflow scenarios that assume genuine two-way rent movement.