Are upwards only rent reviews going down? 

• 25 July 2025
• News

What leases will be caught by the Bill?

The proposed ban on upwards only rent reviews will only apply to leases held by tenants who occupy the premises for business purposes (i.e. to which Part II of the Landlord and Tenant Act 1954 applies). These leases will be caught whether or not they are contracted out of the 1954 Act. The provisions will not have retrospective effect and so will not affect any leases that have been entered into before the Bill comes into force, nor any leases which are entered into pursuant to an agreement for lease which has been dated before the ban. It will however apply to any renewal leases post the Bill coming into force, whether a statutory or independent renewal. Any extension to a lease would also bring it within the remit of the Bill, as this would be treated as a new lease.

What rent review provisions will be impacted?

The Bill would ban upwards only rent reviews in any form, whether by reference to open market rent, turnover or indexation/inflation. The revised rent would have to be able to go up or down. It is not yet clear whether rent collars will be permitted, as the guidance notes to the Bill state that the Bill “may include exceptions to allow for caps and collars to be used”.

The ban will only apply where the new rent is undetermined on the date the lease is entered into. This means that it will not affect stepped rents, where the rent increases have already been pre-agreed and set out in the lease.

Can landlords get around the provisions?

In short, no. The draft legislation contains robust anti-avoidance provisions. The Bill covers off the scenario whereby a landlord could avoid triggering a rent review by simply not serving a rent review notice on the tenant. In those circumstances, tenants can serve their own notices to trigger the rent review process.

The Bill also prohibits the use of a “put option” whereby the landlord can require the tenant to take a renewal lease at the higher of market rent and passing rent, rather than having a rent review. Agreements for the tenant to make a payment in respect of any difference between the existing and new rent following rent review are also void pursuant to the Bill.

Why has the government proposed this ban?

The government is seeking to address the high number of vacancies that we are seeing on high streets and aims to support small retail businesses by ensuring that their rents aren’t going up during difficult economic times. A ban on upwards only rent review has been talked about by previous governments, and across the globe most jurisdictions do not have upwards only rent reviews (for example, Ireland abolished them in 2010). The idea is that by ending upwards only rent reviews, commercial rents will more accurately reflect market conditions, which will help to reduce retail tenant insolvencies and vacant units on high streets.

Our thoughts on the proposals

One immediately obvious aspect of the Bill is that it is not limited to retail tenancies. It applies to all commercial tenancies where tenants are in occupation which includes, amongst others, office and industrial tenants and energy infrastructure leases – not sectors the government is concerned about addressing in terms of vacancies.

Also, many retail leases are granted for shorter terms of five years or less and therefore do not contain rent review provisions. This means that the sector the government is seeking to help is probably the one least likely to benefit from this ban. There are larger issues at play which impact the retail sector such as high business rates and a move from consumers towards online shopping. Downwards rent reviews aren’t going to address these economic pressures for retailers.

In the short term, abolition of upwards only rent reviews is likely to lead to a loss in confidence from investors and could slow down and destabilise an already challenging market. Lenders want certainly around their return on investment, and a move away from upwards only rent reviews could lead to reduced investment and less commercial property becoming available. This could stifle economic growth as lenders and investors have to price in the risk of rental income going down, and could be a cause of concern for pension funds.

We could see lower quality real estate stock being most affected by the ban, as landlords may be less willing to invest in stock which is already riskier in terms of rental income. Landlords could also push for higher starting rents to try to maintain a suitable income stream throughout the lease term, although of course tenants may resist this.

How could lease terms change as a result?

Longer term, an abolition of upwards only rent review could lead to a change in lease structures.

• Increase in index linked rent review and turnover rents – We could see an increase in these being used rather than the more traditional open market rent review model, provided always that the rent can go down if turnover or inflation fall.
• More frequent reviews – Rent reviews could take place more frequently than the usual five year model to allow landlords to regularly adjust their rent in line with the market. This is a more common practice across Europe.
• Shorter lease terms – As already mentioned, many retail leases already have terms of less than five years, but if the Bill comes into force this could become the norm for other commercial leases as landlords try to avoid the effects of a possible downward review.
• Landlord break clauses – Another possibility is for landlords to grant leases without security of tenure, and to include landlord only break rights to allow for their exit should the rent decrease.
• Use of stepped rents – Landlords could also opt for stepped rents maintained over longer periods in order to provide more certainty over the rental stream.

All of these options will of course depend on the bargaining power of the parties and the overall market conditions.

What are the next steps?

The Bill will need to go through several readings in Parliament and then on to committee review before it can become law, so we would expect it to be thoroughly interrogated. There are already practical issues apparent with the proposed legislation. For example, as the ban is intended to only apply to tenancies where the business tenant is in occupation, what will happen where the tenant has underlet the whole of its premises? In that scenario it would seem that the ban will apply only to the underlease and not to the tenant’s lease, which could result in the tenant paying more rent following a rent review than its undertenant is paying. The fact that the Bill doesn’t have retrospective effect also means that there could be a discrepancy where underleases are granted post the ban coming into force – the lease will still have an upwards only rent review, but the underlease will be subject to an upwards or downwards review. These aspects of the Bill will need to be carefully considered. We will be closely monitoring the progress of the Bill and will keep you updated.

This is an opportunity for representatives of the real estate sector to collaborate with the government to ensure that whatever is decided in relation to rent reviews is for the benefit of the property industry as a whole. Commercial real estate bodies such as the British Property Federation (BPF) are currently formulating responses to the government amidst their concerns that the impact on the property market could be immense, and we will be feeding into these discussions. Concerned landlords and investors should take the opportunity to engage with industry bodies such as the BPF to make sure their views are represented.

Having upwards and downwards rent reviews does work in other countries so this model can succeed, but it needs to be carefully considered and made in consultation with the wider property industry to ensure that there aren’t any unintended economic consequences. Whether or not upwards only rent reviews end up being prohibited, this is a chance for the commercial real estate sector to suggest options to help revive our high streets and to shape the future of leasing, but it’s essential that the government listens to these views for any changes to succeed.