Why the proposed ban on upward-only rent reviews could reshape commercial property

The government’s proposal to ban upward-only rent reviews in commercial leases has landed with little warning, prompting a strong industry reaction.

Introduced within the English Devolution and Community Empowerment Bill, the measure aims to support high street businesses by allowing rents to fall as well as rise. While the bill is still at first reading stage, the implications of the policy are being analysed and debated across the commercial property sector.

The proposal would prohibit upward only rent review clauses in new business tenancies (meaning tenancies where the tenant is occupying to carry out business activity). Existing leases are unaffected, but the ban would apply to new leases including renewals, whether statutory or agreed. The drafting is deliberately broad, applying to all upward-only reviews where the rent increase cannot be known at the outset, including open market and index linked mechanisms. Anti-avoidance provisions are also included to prevent landlords from sidestepping the rules through creative drafting.

The government’s rationale is clear: in a volatile economic climate, tenants need flexibility. Upward-only rent reviews can lock occupiers into unsustainable rent levels even when market conditions deteriorate. Allowing for downward adjustments could provide much-needed relief and reduce the risk of tenant insolvency. However, the proposal has been introduced without formal industry consultation, which has led to concerns among some landlords and investors. Many rely on predictable, ratcheting rental income to service debt or underpin investment strategies.

Concerns have also been raised about valuation. Long-term income projections may need to be revised to account for the possibility of downward rent reviews. This, in turn, could affect asset values and lending terms. Landlords may respond by seeking higher starting rents or shorter lease terms.

For tenants, the proposal presents both opportunity and complexity. While the prospect of downward rent reviews is attractive, it may come with trade-offs. Landlords could demand concessions elsewhere in the lease, such as reduced incentives or more frequent break clauses.

Even before the bill becomes law, its high-profile nature could influence lease negotiations. Alternative rent mechanisms, including fixed stepped rents and turnover-based models, may become popular. These approaches offer greater transparency and flexibility, aligning rent with business performance.

The legislative process is far from over. MPs will debate the bill’s principles after the summer recess followed by detailed scrutiny and amendments in the committee stage. The government may face pressure to refine the drafting, clarify definitions, or introduce exemptions for specific sectors.

But is the concern around the proposal proportionate? Various other mature commercial property markets around the world have bans on upward-only reviews in some form or another. Taking a step back to look at the market generally, how many ‘high street’ leases contain rent reviews? Generally, those leases are shorter in the current market and renegotiated at traditional rent review intervals anyway.

In the meantime, landlords continue to assess the potential impact on their portfolios.

Whether the bill passes in its current form or evolves remains to be seen, but the two questions will dominate landlord thinking – is the ban actually a problem for their investments? And how does the market adjust to the new rules long term?

Clive Chalkley is co-head of real estate at Gowling WLG