On 29 April the English Devolution and Community Empowerment Bill received Royal Assent and became law. While the majority of the Act sets out a new framework for devolution of powers to local government across England, in this article we will focus on the ban on upward-only rent reviews in leases of commercial premises.
Upwards-only rent review clauses are common in the commercial property market. Their aim is to ensure that the rent payable under the lease can increase over time, even if the market rate has declined. The Act now removes that upward-only mechanism. In practice, this means that the rent review mechanism adopted in the lease – most common being open market rent and index-linked rent – will be able to move down as well as up. Any upwards only element in rent review clauses will be unenforceable.
All business tenancies to which the Landlord and Tenant Act 1954 applies (including contracted-out leases) will be caught by the ban. The practical effect is that the vast majority of commercial leases will need to have a mechanism to ensure that rent can be reviewed both upwards and downwards. A key point to note here is that the ban will apply whether or not the tenant is in occupation of the premises, as long as the lease permits business occupation, so the ban will apply if, for instance, the tenant has sublet the property.
Further, while the ban does not apply retrospectively as a general rule, there is a specific exemption: where an option to renew has been entered into on or after 17 March 2026, the new lease granted pursuant to that arrangement will be caught. The objective is to prevent “pre-emptive” leases whereby landlords might try to lock in upward only reviews for new leases shortly before the commencement of the Act. In terms of commencement, the ban on upward only rent reviews is currently not in force and this is anticipated to come into effect in 2027.
The tenants will also be given an ability to trigger a rent review mechanism (if there is a mechanism in the lease which currently only the landlord can trigger), thereby preventing landlords triggering a review in favourable market conditions.
Lastly, we understand that the Government will open a consultation on introducing a “collar” (minimum rent fall) and “cap” (maximum increase) before the ban is implemented.
At Buckles, we regularly deal with various landlord and tenant matters. Our Property Litigation department can assist in the event of a dispute involving commercial property, while our Property team can assist with leases, transfers and advice on your property portfolio. If you need advice on your property matter, do contact us for further discussion.
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