Summary
A significant change is going to impact the commercial property market in the near future, following the passing of the English Devolution and Community Empowerment Act 2026. While most of the Act regards the devolution of power from Westminster to strengthen local government – specific provisions address the subject of rent reviews in commercial leases.
In particular, two new sections will be inserted into the Landlord and Tenant Act 1954 (‘LTA 1954’). These will essentially have the effect of banning “upwards only” clauses in both new leases and renewals.
Current Position
Some commercial leases contain Upwards-Only Rent Reviews (UORRs). This meant that upon rent review, when the rent is evaluated against the current market standard, that new rent could not drop below the amount of rent that was previously payable at the date of review. Consequently, this gave landlords comfort maintaining rent at certain levels in periods of falling open market markets values.
The Ban on the Upwards Clause – Effect on Commercial Rent Reviews
The disallowance of UORR’s therefore brings a significant change – both to tenants and landlords of commercial properties.
A future of more contested evaluations is likely – with tenants being able to negotiate rent reductions in periods where market rent falls. The Act also implies a tenant’s right to review, even if a rent review can only be called by the landlord.
Exceptions
Certain “anti-avoidance” elements have been implemented to ensure compliance, including provisions so that parties cannot “contract out” of the prohibition.
However there are possible methods of circumventing the new provisions, through clauses enabling fixed increases of rent or review by way of Index Price shifts. Such clauses would tie the rent adjustment to a macroeconomic inflation or pricing index (for example, the Consumer Price Index (CPI) or the Retail Prices Index (RPI). Unlike traditional open market rent review clauses (referring to the open market value of neighbouring properties), an index linked review would refer broadly to the cost of living. Because these indices historically trend upward over time, landlords can use them to ensure their income keeps pace with inflation while minimising the likelihood of a rent reduction at review.
Additionally, the Act has a limited retrospective reach – affecting any tenancy renewal arrangement entered into on or after 17th March 2026. The term ‘tenancy renewal arrangement’ has been drafted widely and will catch any binding contract that compels either the landlord to grant, or the tenant to take, a future lease where the future rent is not fully fixed
Please note that reversionary leases, (leases granted to take effect in the future), that terminate before implementation of the Act, will fall outside the scope of the ban.
Implementation and next steps
As of yet, there is no clear guidance on when this Act will be implemented – with various sources saying clearer guidance will follow, or the Act to take effect at some point in 2027 or 2028. Alongside this, guidance on “caps and collars” on rent increases have not yet been published.
Landlords should consider stepped rents or clauses enabling fixed increases, which remain permitted. Landlords may also prefer short-term leases which avoid reviews and sets higher initial rents as a safety-net to offset any later market uncertainty.
Overall, the UORR ban represents a fundamental shift for commercial renting – introducing a market-responsive approach.
Please consult with any member of the commercial real estate team for guidance on this issue.
