Commercial Rent Review Reforms: What They Mean for Landlords
What Is Changing
The Government has proposed banning upwards-only rent reviews in new commercial leases. At the same time, tenants will gain statutory powers to trigger rent reviews where a landlord delays or where the lease is silent.
Scope of the Ban
The prohibition targets clauses that prevent rent from decreasing at review. It captures:
- Open market reviews
- Index-linked reviews with collars that block downward movement
- Turnover mechanisms that only increase rent
What Still Works
Fixed or stepped increases remain permissible. Landlords and tenants can still pre-agree on a rent path where future amounts are known from the outset.
Who and What It Applies To
The reforms apply to business tenancies in England and Wales. Renewals under the Landlord and Tenant Act 1954 are also expected to be caught, not just brand-new lettings.
Tenant-Triggered Rent Reviews
Tenants will gain the right to start or progress a review if the landlord stalls. They may also take operational steps to ensure the review process runs smoothly.
Anti-Avoidance and No Contracting Out
Anti-avoidance rules void any structure designed to replicate upwards-only outcomes. The new regime will be mandatory, and parties cannot contract out of these provisions.
Timing and Transition
The Bill remains at an early stage. Dates are not yet fixed, but the Secretary of State will have the power to set exceptions and transitional rules through secondary legislation.
Why This Matters for Landlords
Income certainty will be reduced when reviews can fluctuate in either direction. This change could affect debt pricing, valuations, and covenant strength, with knock-on implications for lenders and investors.
High Street and Investor Confidence
The ban may push landlords to set higher initial rents, shorten lease terms, or introduce more break options. Investor confidence in high street premises could also be affected.
Market Behaviour We Expect
- Greater reliance on fixed uplifts where cashflow modelling is critical
- Wider use of turnover top-ups with genuine two-way movement
- Increased use of caps and floors to balance landlord and tenant risk
Leasing Strategy Now
Audit all heads of terms and ongoing negotiations—model dual scenarios: fixed uplifts versus two-way reviews with caps and floors.
Negotiation Tactics
Landlords may trade rent review flexibility for other benefits, such as:
- Security of tenure
- Fit-out contributions
- Longer rent-free periods
It will also be vital to secure clarity on service charges and repair caps to offset revenue volatility.
Funding and Valuation
Expect lenders to scrutinise:
- Debt service cover ratios
- Break risk
- Review mechanics
Reserve accounts or ratchet covenants may be needed to protect compliance.
Portfolio Risk Management
Map leases by review type, next review date, and sector exposure. Re-gear where tenants value flexibility, this can be monetised.
Asset Management Plays
- Use shorter lease terms with mutual breaks to retain pricing power
- Invest in strong locations where fundamentals support two-way reviews without eroding estimated rental value (ERV)
Sector Focus
Retail and Hospitality
These sectors are likely to see the fastest adoption of two-way reviews, with more indexation (without collars) and calibrated caps.
Offices and Logistics
Prime assets with strong demand should retain landlord leverage. Secondary assets may need incentives to balance two-way risk.
What to Watch in Parliament
Key points to follow include:
- The definition of prohibited clauses versus permitted fixed steps
- The wording of tenant-triggered rent reviews and the operational actions tenants may take
Template Clauses to Rework
- Remove “greater of” constructs that block rent reductions
- Redraft put-options and side-letters that replicate upwards-only effects
Heads of Terms Checklist
Clearly state:
- The review basis and two-way operation
- Caps, floors, and timing
- Data sources and dispute resolution routes
- Expert determination rules
Ban on Upwards-Only Rent Reviews: SEO Note
We cover the ban on upwards-only rent reviews in depth for BLA members. The prohibition will reshape negotiations across all sectors. Landlords should prepare for the ban on upwards-only rent reviews with robust modelling and careful documentation.
FAQs
Does this affect existing leases?
No. Existing leases are expected to remain unchanged. The reforms apply to new grants and renewals.
Can we still use indexation?
Yes, provided both upward and downward movements are possible. Collars blocking reductions are likely prohibited.
Are fixed uplifts still allowed?
Yes. Fixed or stepped increases agreed from the outset remain permissible.
What if a landlord refuses to start a review?
The tenant-triggered rent review right will allow tenants to initiate or progress the process and take necessary operational steps.
Can we contract out?
No. The regime is mandatory, and anti-avoidance provisions are broad.
Will renewals under the 1954 Act be affected?
Yes. Renewals are expected to be captured as the tenancy continues on new terms. Careful drafting will be required to avoid recreating an upwards-only effect.
What sectors are most exposed?
Secondary retail and weaker offices face the most significant pressure. Prime assets will continue to command leverage through location and scarcity.
When will this start?
No dates are confirmed. Secondary regulations will set the final timing and detail.
Conclusion
These proposals fundamentally alter the balance of rent review risk. Landlords should start modelling scenarios, rethinking incentives, and redrafting review mechanics now to remain competitive in the market.
Our top-read blogs:
Is Commercial Property a Good Investment in England & Wales?
Commercial Property Rent Review Protocol
Investing in Commercial Property vs Residential Property: The Advantages and Disadvantages
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Useful External Links
https://www.ft.com/content/02897c7e-8fc3-47a3-b644-8e93d85b534d
https://www.reedsmith.com/en/perspectives/2025/07/potential-prohibition-on-upwards-only-rent-reviews
