A significant change to commercial property law is on the horizon, with the English Devolution and Community Empowerment Act 2026 introducing a statutory ban on upwards-only rent reviews in commercial leases.
The Act received Royal Assent in April 2026. However, the ban is not yet in force and there is currently no confirmed commencement date, although implementation is expected in 2027.
The reforms could have a significant impact on both commercial landlords and tenants, changing not only the way rents are reviewed - but potentially how leases are negotiated and structured in the future.
What is an upwards-only rent review?
Upwards-only rent reviews have been a common feature of commercial leases for a long time.
Typically, the rent is reviewed at set intervals during the lease term, often in line with the open market rent.
Under an upwards-only provision, however, the rent can increase or remain the same following a review, but it cannot decrease - even if market rents have fallen.
This provides landlords with a degree of certainty over future rental income, while potentially leaving tenants paying more than the prevailing market rent during a downturn.
The new legislation is intended to change this.
What is changing?
Once the relevant provisions come into force, certain rent review mechanisms in new commercial leases will no longer be able to operate on an upwards-only basis.
In simple terms, where the rent review mechanism produces a lower figure, a clause will not be able to prevent the rent from falling simply because it is lower than the rent previously payable.
This represents an important shift in the commercial property market and could affect the way landlords, tenants and their advisers approach lease negotiations.
What will the ban mean for landlords?
For landlords, one of the most significant consequences will be the loss of certainty that rent cannot decrease at review.
If market rents fall significantly, a landlord could find that the rent payable by their tenant also falls following the next review.
This creates greater exposure to changes in the property market and makes it more difficult to predict rental income across the future term of a lease.
As a result, landlords may look for other ways to provide greater financial certainty when negotiating new leases.
What will it mean for tenants?
On the face of it, the change should benefit tenants.
Allowing rents to move down as well as up means tenants could pay a rent that more closely reflects the prevailing market, particularly during periods when commercial property values and rental levels have fallen.
However, there could also be unintended consequences.
With landlords losing some of the income certainty traditionally provided by upwards-only reviews, they may seek to compensate elsewhere - potentially through higher initial rents, shorter lease terms or different rent structures.
Tenants will therefore need to consider the overall commercial package rather than assuming the reforms will automatically result in lower occupancy costs.
What could become the new normal?
The ban is likely to lead to changes in the way commercial leases are structured.
One obvious alternative is a traditional open market rent review without an upwards-only provision. This would allow the rent to rise or fall depending on the market value at the review date.
Other approaches may also become more common.
Turnover rents, for example, can link some or all of the rent payable to the tenant's turnover, allowing rent to respond to the performance of the business.
Stepped rents may provide another option, with increases agreed at the outset and taking effect on predetermined dates. This can give both parties greater certainty over what will be payable throughout the lease term.
We may therefore see landlords and tenants exploring a wider range of rental structures as the market adjusts to the new regime.
Will existing commercial leases be affected?
The reforms do not simply make every existing upwards-only rent review clause invalid.
However, the transitional provisions mean landlords and tenants should not assume that arrangements being negotiated now will necessarily fall outside the new regime.
This is particularly important for lease renewals, agreements for lease, options and other arrangements entered into on or after 17th March 2026, which may be caught depending on their terms and when the resulting tenancy is granted.
Taking advice at an early stage is therefore important, particularly where negotiations or contractual arrangements entered into now could result in a tenancy after the legislation comes into force.
What should landlords and tenants do now?
Although the ban is not expected to take effect until 2027, and a commencement date has yet to be confirmed, it should already be part of commercial lease discussions.
Landlords should consider upcoming rent reviews, lease renewals, agreements for lease and options and assess how the new regime could affect future rental income.
Tenants should also consider what the changes could mean for upcoming negotiations, particularly where landlords propose different rental structures or seek greater certainty elsewhere in the lease terms.
Upwards-only rent reviews have been a familiar feature of the commercial property market for many years. Their removal will require both landlords and tenants to adjust - and obtaining advice now can help ensure new arrangements are structured with the forthcoming rules in mind.
How Coles Miller can help
Coles Miller's Commercial Property solicitors advise landlords, tenants, investors and businesses on all aspects of commercial leases.
We can advise on rent review provisions, lease renewals, agreements for lease, options and new lease negotiations, as well as how the forthcoming ban on upwards-only rent reviews could affect existing plans.
With the commercial leasing landscape set to change, taking advice early can help you understand your options, negotiate appropriate terms and avoid unexpected consequences when the new rules come into force.