A practical guide for landlords, tenants and investors
UPWARDS-ONLY RENT REVIEWS — WHAT’S CHANGING?
The English Devolution and Community Empowerment Act 2026 introduces one of the most significant changes to commercial lease structures for many years.
The Act introduces legislation to prevent the use of upwards-only rent review provisions in qualifying commercial leases in England and Wales.
For landlords, tenants and property investors, the change could have important implications for the way commercial leases are negotiated, valued and structured in the future.
The legislation has received Royal Assent, but the new rent-review provisions are not yet in force. Further regulations and commencement arrangements are required before the new regime takes effect.
What is an upwards-only rent review?
An upwards-only rent review is traditionally used in longer commercial leases, often at three- or five-year intervals.
The rent is reviewed against an agreed mechanism, such as open market rental value, but the lease provides that the rent cannot fall below the existing passing rent.
For example:
Current rent: £50,000 per annum
Market rent at review: £45,000 per annum
Upwards-only review: £50,000 remains payable.
If the market rent had increased to £60,000, the revised rent would generally become £60,000.
This mechanism has historically provided landlords and investors with greater certainty over future rental income and has been a common feature of commercial investment property.
What will change?
The 2026 Act inserts new provisions into the Landlord and Tenant Act 1954 which restrict upwards-only rent review provisions in qualifying business tenancies.
The legislation is deliberately broad. It can apply to rent reviews based on factors including market rent, inflation or other indices, and turnover, where the review mechanism would otherwise prevent the rent falling below the relevant reference amount.
Where the new provisions apply, an upwards-only provision will effectively be disregarded where it would prevent a reduction in rent.
In practical terms, a future qualifying rent review could therefore result in the rent:
increasing • remaining unchanged • or decreasing
depending upon the agreed review mechanism and market conditions.
What does this mean for landlords?
For landlords, the principal change is the potential loss of some of the rental-income protection historically provided by upwards-only reviews.
Investment values are influenced by the level and security of rental income. Removing upwards-only protection introduces greater uncertainty into future cash flows, particularly for properties with long leases and several future review dates.
Landlords may therefore place greater emphasis on the terms agreed at the start of a lease.
This could include greater use of:
- fixed or stepped rents;
- index-linked increases;
- more frequent reviews;
- shorter lease terms;
- break options; and
- carefully negotiated initial rents.
The market will ultimately determine which structures become commercially attractive.
What does this mean for tenants?
For tenants, the legislation could provide greater protection where market rents fall.
A tenant occupying premises in a market experiencing declining rental values may no longer automatically remain tied to its previous passing rent at a qualifying review simply because the lease contains an upwards-only provision.
However, the benefit should not be overstated.
Landlords may respond to the additional rental risk when negotiating new leases, potentially through higher initial rents, fixed increases or different lease structures.
The important issue for tenants will therefore be to consider the whole economic package of the lease, rather than simply whether a rent review can move downwards.
What does this mean for investors?
For commercial property investors, the change is particularly relevant to investment appraisal.
Two properties with identical passing rents may have different investment characteristics if one has secure contractual rental growth and the other has greater exposure to potential downward rental movements.
Investors may therefore need to give greater consideration to:
- the precise wording of rent review provisions;
- the quality and location of the property;
- current market rental levels;
- comparable rental evidence;
- tenant covenant strength;
- lease length and break options;
- future rental-growth assumptions; and
- the potential downside in rental income.
The RICS (Royal Institution of Chartered Surveyors) has highlighted concerns that the removal of upwards-only reviews could have wider implications for investment values because certainty of rental income has historically supported commercial property investment, including assets held by institutional investors and pension funds.
What about existing leases?
The new regime is primarily directed towards new arrangements and specified renewals or variations following commencement.
The legislation contains transitional provisions protecting certain arrangements entered into before the relevant provisions come into force. However, there are important exceptions, including certain renewal arrangements entered into on or after 17 March 2026.
This makes it particularly important for landlords and tenants negotiating lease renewals, extensions or variations to understand exactly how the transitional provisions apply to their circumstances.
Existing leases should not simply be assumed to be unaffected, particularly where they are subsequently varied or replaced.
Will commercial leases become shorter?
Potentially, although the market response remains to be seen.
A landlord granting a 15- or 20-year lease may be less willing to accept long periods of rental exposure without some alternative form of rental-growth mechanism.
This could encourage greater use of:
fixed increases | stepped rents | indexation | shorter review periods | break options
However, longer leases can still provide valuable occupational security for tenants and income security for landlords, so the commercial advantages of longer terms will remain.
The likely change is therefore not necessarily the disappearance of long leases, but greater negotiation over how rental risk is shared between landlord and tenant.
What should landlords, tenants and investors do now?
Although the new rent-review provisions are not yet in force, the legislation should already be considered when negotiating future leases and reviewing existing portfolios.
Landlords should review upcoming lease renewals, future review dates and alternative rental structures.
Tenants should understand how future reviews may operate and consider the implications when negotiating new leases, renewals and extensions.
Investors should examine future rental income assumptions carefully and consider whether investment appraisals adequately reflect the potential for downward rental movements.
A new approach to commercial lease negotiations
The English Devolution and Community Empowerment Act 2026 represents a significant change to the traditional commercial rent review model.
The legislation does not prevent landlords from increasing rents, nor does it mean that commercial rents will automatically fall.
Instead, it changes the risk profile of future rent reviews, moving away from the traditional assumption that a qualifying review can only produce an increase or no change.
For landlords, tenants and investors, the focus is likely to shift towards the initial rent, lease length, rental-growth mechanisms, incentives and the precise drafting of rent review provisions.
With the detailed commencement arrangements still to be confirmed, commercial property owners and occupiers should consider the implications now when negotiating new leases and lease renewals.
