Leases of commercial property often contain upwards-only rent review provisions. These provide that – where, for example, rent is to be reviewed by reference to open market conditions or inflation – the rent can go up at review or stay the same, but cannot go down.
However, draft legislation to ban these provisions was introduced to the UK Parliament in July 2025. As discussed further below, the English Devolution and Community Empowerment Bill (the “Bill”) is making swift progress through the Parliament. Increasingly, it appears a question of when – and not if – it will become law in England and Wales.
The proposal – a summary
The Bill, if enacted, will prohibit upwards-only rent reviews in new commercial leases which grant the tenant a right to occupy the property for business purposes.
The ban will apply both to leases that are ‘contracted out’ of the Landlord and Tenant Act 1954 and to those that are not. The ban is not generally retrospective, but it will apply to leases granted before it comes into force when those leases come to be renewed.
A rent review provision which adjusts rent upwards or downwards by reference to changes in an index such as the Consumer Prices Index will be compatible with the new rules. However, a rent review provision which increases the rent in times of inflation but does not decrease the rent in times of deflation will fall foul of the proposed ban.
Similarly, only an open market rent review clause which provides for rent to both increase and decrease as open market rents rise and fall will be permissible under the new rules.
One of many anti-avoidance provisions in the Bill will give tenants the ability to initiate the rent review process, whether or not they have this ability in their lease. A tenant might choose to do this where its landlord is refusing to trigger a rent review, predicting a downwards result.
Importantly, the Bill will not prevent parties from completing new leases containing stepped rents – that is to say, pre-agreed increases in the rent at specific points during the term. This is because the ban will only apply in cases where future rent is not known or cannot be determined when the lease is granted. Leases containing stepped rents may, therefore, become more common in England and Wales going forward, with landlords prepared to accept fixed (but certain) uplifts in the rent over the lifetime of the lease.
What happens next?
The UK Government believes that banning upwards-only rent reviews will “help keep small businesses running, boost local economies and job opportunities and help end the blight of vacant high streets”. Critics, on the other hand, argue that high street tenants are entering into increasingly shorter leases that do not contain rent reviews and so will not benefit from any ban.
Organisations including the British Property Federation have suggested that government should be focused on the “big picture of enabling and empowering local public and private stakeholders, including property owners and their customers, to work together to drive economic growth and create thriving town centres” rather than “getting mired in detailed market issues”.
At the time of writing, the Bill is at the penultimate stage of its passage through the House of Lords. With the Labour Party’s majority in Parliament, it appears very likely to become law, although documents published alongside the Bill suggest that a ban would not be implemented until 2027 or 2028. England and Wales would then join the Republic of Ireland in having prohibited upwards-only rent reviews.
The Scottish Government has not announced any plans for a similar ban for commercial properties north of the border. It is worth noting, however, that the Scottish Parliament passed legislation in 2025 that creates the potential for parts of Scotland to be designated as rent control areas. In these areas, the amount by which a landlord can increase the rent payable under certain residential tenancies will be capped. Further details of those reforms can be found here.
If you are a commercial landlord or tenant dealing with rent reviews or you have any concerns or questions about the impact the legislation may have on you or your business, please do not hesitate to get in touch with your usual Brodies contact.
Contributor
Practice Development Lawyer
