On 29 April 2026, the English Devolution and Community Empowerment Act 2026 (the Act) received Royal Assent. Buried within wide-ranging devolution legislation, new provisions now prohibit upward-only rent review clauses (UORRs) in all new commercial leases in England and Wales. For both owners and occupiers, this reform will impact the characteristics of commercial property in England and Wales as an asset class.
What the legislation does and what is prohibited
- The Act amends the Landlord and Tenant Act 1954 by inserting
new provisions that prohibit upwards-only rent review clauses in qualifying commercial leases. The ban will apply to all business tenancies, whether or not they have security of tenure, across all sectors. It will apply to tenancies made pursuant to any kind of arrangement, including renewal leases, agreements for lease, and landlord put options.
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Any rent review provision in a new lease will be void to the extent that it:
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requires the reviewed rent to be higher than a reference amount such as the actual rent, tenant turnover, or the effect of CPI/RPI;
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guarantees a minimum percentage uplift irrespective of market conditions, e.g., by using a collar; or
o otherwise prevents the reviewed rent from falling below any previously agreed level. -
There is still some uncertainty as to what exactly will fall within the prohibition. A definitive stance will only be possible after further guidance has been released
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The ban is not yet in force and will be implemented by secondary legislation. This is expected in 2027. However, there is a retrospective element to the ban that has already come into effect – namely that commercial leases containing a contractual renewal option entered into on or after 17 March 2026 will be subject to the ban when that renewal option is exercised.
Instead of being certain, quantifiable and ever-increasing, income from new commercial leases will no longer be structurally protected against market downturns. In addition to putting income at risk, the ban is likely to have an adverse effect on the valuation of property portfolios. As a strong performing sector, logistics may be less likely to feel the effect of the ban than sectors in commercial real estate that have not fared so well recently.
Options for structuring leasing arrangements
These reforms present one of the greatest changes to commercial leasing in decades, and we expect to see an effect on how landlords and tenants structure occupational arrangements. We have set out in the table below an overview of different options available, with their corresponding advantages and disadvantages.
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Structuring option
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Description |
Advantages |
Disadvantages |
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Fixed, stepped rents |
Specific fixed rent increases agreed at the beginning of the term. These are expressly permitted under the new regime. |
Provides maximum income certainty for landlords in addition to cost certainty for the tenant, in addition to ensuring rental income increases over time. |
Lack of flexibility to adjust the rent to reflect market conditions. It is a gamble as to whether a tenant will end up paying more, the same, or less than the market rent in a few years' time. |
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CPI / RPI linked reviews |
Standard CPI and RPI linked reviews will be allowed under the new regime as in theory, these factors can decrease.
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While both factors can decrease, this is less likely than with open market rent reviews.
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There remains a residual risk for landlords that CPI / RPI will decrease. |
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Shorter terms |
Landlords could enforce shorter lease terms at the outset, or enhanced break options, so that on each new lease a new market rent is set. |
Shorter terms reduce the period of exposure to downward rent movements, enabling re-letting to market at each expiry. Landlords can then increase the rent as necessary at each break, ensuring income remains high while avoiding the need for a UORR. |
This increases transactional costs for both parties, including a higher SDLT liability for the tenant over time. Introduces risks associated with re-letting – a tenant can walk away, leading to gaps in income generation. Landlords also risk losses if tenant demand decreases. Viability will depend on whether tenants are willing to accept shorter lease lengths and / or enhanced landlord break options. Further, as term certain underpins leasehold value, this option is likely to have an impact on portfolio valuation. |
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Rent "top-ups" |
Landlords could include a factor-linked "top-up" mechanism within the lease itself. Under this model, the base rent itself remains fixed, but the tenant would be liable to pay an additional fee where a factor such as turnover exceeds an agreed threshold. |
Increases the probability of heightened income whilst simultaneously preserving a baseline rent, acting as a collar. |
The Act has strong anti-avoidance provisions, and the addition of a "top-up" mechanism risks being caught within them. However, this will depend on the wording in the secondary legislation used to implement the ban. This may not be of use in the I&L sector where it is more difficult to measure "turnover" as against, for instance, a retail lease. |
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Use of contractual arrangements |
Contractual arrangements, such as concession agreements and management agreements, allow landlords to incorporate provisions that ensure rents will increase. |
Contractual arrangements will not be caught by the ban. Documenting property occupancy this way is already an established practice. |
There is a risk that contractual arrangements will be caught by the ban if a court interprets them as constituting a leasing arrangement. However, if drafted properly, these should not be considered leases and would therefore be outside of the ban. |
