The English Devolution and Community Empowerment Act 2026 has been given royal assent and is expected to officially come into force in 2027 or 2028. It intends to deliver on the government’s commitment to devolve power more widely across England. The Act covers a broad range of measures, however, of particular significance to the commercial property sector, is a ban on upwards-only rent review (UORR) clauses in new and renewal commercial leases in England and Wales.
The act has inserted new provisions into the Landlord and Tenant Act 1954, rendering upwards-only rent review terms ineffective in two key scenarios:
- Rent reviews during the term of a commercial lease, and
- Commercial lease renewals, regardless of whether the landlord or the tenant seeks to impose the rent review mechanism.
The ban would not apply where rent increases are pre-determined by reference to fixed, known figures set out at the outset of the lease.
For example, a 20-year lease granted at £100,000 per annum could lawfully provide for fixed stepped increases, such as £115,000 at year five, £130,000 at year ten, and £150,000 at year fifteen.
How Upwards-Only Rent Reviews Currently Work in Commercial Leases
At present, most commercial leases provide for rent reviews every three or five years. These reviews are commonly based on:
- Open market rent, often with assumptions and disregards, or
- Index-linked increases, such as those tied to RPI, or
- The rent payable immediately prior to the review date.
In practice, these mechanisms ensure that rent can either increase or remain the same, but never decrease, even where market conditions have softened.
What the Ban on Upwards-Only Rent Reviews Actually Means
Under the proposed reforms:
- Rent would be permitted to move both upwards and downwards, depending on the market value of the lease at the review date.
- Caps and collars, and similar risk-management provisions (for example, clauses limiting annual rent increases to 2% or 4%), are prohibited.
- Tenants would gain the right to initiate a rent review by serving notice, removing the landlord’s exclusive control over the timing of the review process.
Importantly, the ban does not apply retrospectively. Existing leases, and leases already agreed before the legislation comes into force, would remain unaffected. The changes would apply only to new leases and renewals entered after commencement.
How the Ban Will Affect Landlords, Tenants and Lenders
Tenants
The reforms would significantly enhance tenants’ bargaining power, particularly in weaker markets, by allowing rents to reflect genuine market conditions rather than being locked into historic highs.
Landlords
For landlords, increased valuation complexity and the possibility of downward rent movements may introduce greater uncertainty into income forecasting and asset valuation.
Lenders
Greater volatility in rental income could lead lenders to reassess risk, potentially resulting in higher borrowing costs or more conservative lending terms where income projections are less certain.
What Should Landlords and Tenants Do Now?
Both landlords and tenants should begin reviewing:
- Upcoming lease renewals, and
- The structure of new commercial leases currently under negotiation.
Early advice will be essential to understand how these changes may affect your position and to plan accordingly. Our experienced commercial property team is available to provide tailored guidance based on your specific circumstances.
Please contact us by phone on 01925 263273 or email enquiries@fionabruce.co.uk
The contents of this post do not constitute legal advice and are provided for general information purposes only ■
