A significant change to commercial leases is on the horizon. The English Devolution and Community Empowerment Act 2026 introduces restrictions on upwards-only rent review provisions in commercial leases in England and Wales.
The new rules are not yet in force and further regulations are expected, with implementation not expected before 2027. However, the changes are already relevant to landlords and tenants negotiating new leases, renewals and other arrangements.
The Change Is Coming, But Not Yet in Force
An upwards-only rent review allows rent to increase, or remain unchanged, at a review date but prevents it from falling even where market rents have decreased.
Where the new legislation applies, provisions having this effect will no longer be permitted. If the relevant rent review mechanism produces a lower rent, a clause preventing that reduction will generally be disregarded.
The restrictions cover rent reviews based on measures including open market rent, inflation or another index, and turnover. Fixed or stepped rents, where the future rent is known or calculable when the lease is granted, are treated differently and are not caught by the ban.
The legislation also allows for regulations to provide exceptions, including potentially in relation to caps and collars.
For a fuller breakdown of how the ban itself works, our earlier article, A Turning Point for Commercial Leasing, covers the legislation in more detail.
What Landlords Should Consider Right Now
For landlords, the reforms mean greater exposure to falling market rents where the new regime applies. Rental income may become less predictable, potentially affecting investment decisions, financing and property values.
The wider terms of a lease will therefore become increasingly important. Landlords may need to consider the balance between initial rent, lease length, break rights, incentives and the chosen rent review mechanism rather than relying on an upwards-only review to protect rental income.
The legislation also contains anti-avoidance provisions, meaning the restrictions cannot simply be circumvented by achieving the same result through another contractual arrangement.
What Tenants Should Consider Right Now
Tenants could benefit from greater protection where market rents fall. However, the reforms do not mean that rents will automatically reduce at every review. The outcome will depend on the rent review mechanism and the market at the relevant time.
The legislation also gives tenants greater control in certain circumstances, including the ability to trigger a qualifying rent review where the lease does not otherwise give them that right.
Why 17 March 2026 Already Matters for Renewals
The new rules are not intended simply to rewrite existing leases. Transitional provisions will protect certain arrangements entered into before the new regime comes into force.
However, an important date is 17 March 2026. Certain renewal arrangements entered into on or after that date can be caught by the new regime. The timing and structure of a transaction may therefore be critical.
Landlords and tenants should take advice before assuming that an existing upwards-only provision will continue to operate unchanged, particularly where a lease is being renewed, restructured or replaced.
Getting Advice Before You Sign
Landlords should review upcoming lettings and renewals and consider how they want to manage rental risk. Tenants should consider how proposed rent review provisions could operate in both rising and falling markets.
For both parties, rent review provisions should be considered as part of the wider commercial deal.
At Fiona Bruce Solicitors, we advise both landlords and tenants on commercial leases, renewals and rent review provisions. If you have a new lease, renewal or rent review approaching, our commercial property team can help you understand the implications of the changing rules and ensure that the arrangements reflect your commercial objectives.
For more information, contact Rebecca Hall on 01925 263273, or via email to enquiries@fionabruce.co.uk.
The contents of this post do not constitute legal advice and are provided for general information purposes only ■
