The ban on upwards-only rent reviews: a practical guide for corporate occupiers

At a glance

• Whilst the ban is not expected to come into force until 2027 or 2028, corporate occupiers need to consider its effect now.

• The ban is expected to apply to new and renewal business leases entered into after it comes into force; existing leases will generally continue on their current terms.

• Rent review provisions will generally need to allow rents to move down as well as up, subject to detailed statutory exceptions and transitional rules.

• Occupiers should audit upcoming lease events, review the rent review mechanisms in their leases, and model the financial effect of two-way reviews.

• Caps, collars, indexation and hybrid mechanisms will require careful review and drafting. This article is a general overview for corporate occupiers. It does not constitute legal advice. For guidance specific to your circumstances, please contact us.

An imbalance addressed?

For decades, commercial tenants in England and Wales have had to accept a fundamental imbalance in how rent changes during the term of their lease. In a strong market, the rent review clause allowed  the rent to rise, but when the market dropped, the reviewed rent did not reflect that; instead it stayed where it was. The result was a one-sided relationship that consistently favoured landlords.

Tenants will therefore welcome the statutory ban on upwards-only rent review clauses. It represents one of the most significant shifts in landlord and tenant dynamics in a generation, and will affect how rent is set and negotiated across the market. It should, therefore, be high on everyone’s agenda.

What are upwards-only rent reviews?

An upwards-only rent review clause in allows the rent to be adjusted at agreed intervals in one direction only. If the open-market rental value has risen, the rent increases to match it. If the value has fallen, the rent stays at the level already being paid. It will never drop.

For landlords, investors and their funders, this mechanism has provided certainty of income and shielded them against market volatility. For tenants, it meant being locked into above-market rents during economic downturns, placing significant pressure on occupancy costs just when businesses most needed support. In many cases, it has been one of the most significant contributing factors to a business failing.

The law

Calls to abolish upwards-only rent reviews are not new. Despite longstanding criticism and voluntary industry codes encouraging alternatives, institutional landlords and their funders continued to insist on them, meaning upwards-only clauses remained the market norm. Legislation will now change that. The English Devolution and Community Empowerment Act 2026 (“EDCEA 2026”) introduces a ban on upwards-only rent reviews in business leases in England and Wales by inserting new Schedules 7A and 7B into the Landlord and Tenant Act 1954 (the “1954 Act”).

The ban is not yet in force. Its commencement depends on regulations, and it is currently expected to take effect in 2027 or 2028.

What will the ban mean in practice?

In a short, rent reviews provisions in new and renewal business leases entered into after the ban comes into force must be able to move the rent down as well as up, depending on market conditions. A provision that does not allow this will either be ineffective or will operate as a two-way review.

The ban does not apply retrospectively. Existing leases that contain upwards-only provisions will continue to operate on their current terms.

The ban covers upwards-only versions of all the common review mechanisms, including open-market reviews, index-linked reviews (for example, RPI or CPI reviews with a collar or with no downward movement) and turnover rent reviews. In broad terms, it applies where the reviewed rent is not fixed or ascertainable when the lease is granted and the mechanism allows only upward movement or guarantees a minimum increase. Rent increases of fixed or stepped amounts, or of fixed percentages, remain permitted, provided the rental figures are known when the lease is granted

There are some exceptions. The ban will not apply to:

• leases entered into before the ban comes into force; and
• leases entered into under a "protected pre-commencement arrangement" which broadly covers agreements for lease and options entered into with new tenants before the ban comes into force.

However, the ban will apply to leases granted under a "tenancy renewal arrangement". This includes an agreement for lease or an option entered into with an existing tenant on or after 17 March 2026, for all or any part of the premises it already occupies.

Other points to be mindful of:

• If an existing lease (that is not subject to the ban) is varied after commencement to add or alter rent review terms, the varied lease could be caught by the ban.
• Reversionary leases granted before the ban takes effect are unlikely to be caught, even if their term starts after that date.
• Rent review arrangements in side letters, deeds of variation or other ancillary lease documents are also likely to be caught.
• If a lease is surrendered and re-granted (either intentionally or inadvertently) after the ban takes effect, the new lease is likely to be caught and its rent review terms will need to be revised.

Tenants will also have the right to trigger a rent review, even where the lease reserves that right to the landlord. This is another significant gain for tenants, because it means a tenant can seek a reduction in a falling market.

Implications for lease negotiations

The ban shifts the negotiating landscape in favour of tenants, but careful deal structuring will still be needed.

Here are some practical points to bear in mind:

• Landlords’ likely response – without the upwards-only safety net, landlords will need to price in the risk of rents falling during the term. They may seek to offset this through higher headline rents, shorter lease terms (meaning more frequent renewals, with the associated legal and SDLT costs for tenants), more frequent review dates, and stepped or index-linked rents.
• Tenant incentives – landlords may offer fewer or less generous incentives, such as shorter rent-free periods, fewer break rights and smaller capital contributions. Tenants will need to weight up the benefit of two-way reviews on the headline rent and the incentive package on offer.
• Break clauses – the commercial imperative for a tenant break clause may change. Tenants who previously relied on breaks to escape above-market rents may find that two-way reviews provide a degree of self-correction.
• Drafting points – in leases subject to the ban, rent review provisions should avoid upwards-only mechanisms, including collars. Any hybrid rent provision should be structured so that each review element can move in both directions. Where a turnover rent arrangement includes a base (minimum) rent that stops the reviewed rent falling to the turnover-based figure, that base rent may be ineffective, because it prevents the review from operating downwards.

Other transitional and practical considerations

• Valuation, investment and lending – surveyors and valuers will need to adapt. The comparable evidence base has long been influenced by upwards-only clauses, which tended to inflate passing rents during downturns. In a two-way review world, open-market valuations should more accurately reflect genuine supply-and-demand conditions.

Investors, funds and lenders should also be reviewing their underwriting assumptions and any lending conditions that depend on rental income Occupiers should engage their professional advisors early to discuss how all these shifts will impact on their occupational arrangements.

• 1954 Act renewals – where a tenant exercises its statutory right to a new lease, the renewal lease is a fresh grant, so any rent review clause in it must comply with the ban. Landlords will no longer be able to include an upwards-only review in a renewal lease, whether agreed or ordered by the court, even if the previous lease contained one. Separately, the Law Commission is reviewing the 1954 Act renewal regime more widely. Its consultation in late 2024 explored options including making the security of tenure regime opt-in rather than opt-out.
• Uncertainty remains – the Government has not confirmed when the ban will come into force, although it is anticipated to be in 2027 or 2028. Further consultations, including on the use of caps and collars, will likely shape how rent review provisions will need to be drafted in the future.

Key takeaways

• Act now and engage early with your professional advisers and landlords – in current negotiations, raise the ban proactively and use it to revisit deal terms, particularly, incentives such as break rights, rent-free periods, and review frequency.
• Audit your leases – identify when the next rent reviews fall and which mechanism applies. Take advice on any lease renewal or new lease in good time, before negotiations are commenced with the landlord.
• Model the financial impact – work with your professional advisers to understand how two-way reviews will affect rental projections and valuations, particularly for forthcoming lease events and 1954 Act renewals.

Need Help?

The new regime is complex, and important details, including when the ban will come into force and how the transitional rules will apply in practice, remain uncertain. Given what is at stake corporate occupiers should take appropriate advice before entering into new leases, agreeing renewals or varying existing arrangements.

If you would like to discuss how the ban may affect you, please get in touch with Tom Merrick or another member of our Real Estate team. We can help you assess your exposure, review your lease arrangements and develop a strategy that reflects the changing legislative landscape.