Upward only rent reviews

The proposed ban of Upwards Only Rent Reviews in commercial leases has been tabled by a Bill labelled ‘English Devolution and Community Empowerment’. (If the Bill becomes an Act, not many will easily find the whereabouts of the ban provisions as the label does not obviously direct location, although an AI search will probably assist!).

That said, what is the current status of the Bill, and what has been proposed? Tina Dobbs, Senior Associate in our Commercial Property team explains

• What is the status of the Bill?

The Bill was introduced by Government on 10 July 2025 and is in the parliamentary system to achieve Act status.  The process can take at least 6 to 12 months, and will no doubt go through much debate regarding the proposed ban on upwards only rent reviews, having regard to the effect the proposed changes will have on the commercial property market.

• What is an upwards only rent review?

This is a mechanism to ensure that on a rent review, the landlord will never receive less than either the rent set at the date of the lease; or, on subsequent rent reviews, the rent set by that previous review.  The rent review sum is set having regard to the local market and the rent review provisions in the lease, which provide several scenarios that are either to be disregarded or assumed when determining the rent review figure.

The determination of the new rent figure is usually instigated and proffered by the landlord’s surveyor to the tenant or its surveyor for agreement.  If the landlord and tenant cannot agree the figure of the rent review, the matter is usually, as provided by the lease, referred to the RICS where an independent surveyor will determine the figure and charge his/her fee back to the landlord and tenant for that service.

• What are the usual issues for a tenant with an upward only rent review provision in its lease?

A date set for a rent review in a lease is not a date where the figure of the rent review needs to be determined. Time is not what is called ‘of the essence’ in respect of that date.  What might happen is the landlord looks at the local market several months before the review date, decides it is not a good market to guarantee an upwards rent review and so does nothing about the review.  In that instance, the rent payable by the tenant remains at the old rate, notwithstanding that figure might be more than the rent achievable in an open market.

Because a rent review date is not finite, a landlord can implement it at any time after the date where it is able to do so, if the market changes favourably for an upwards rent review.  A tenant who has been paying rent at the rate before the rent review date will then have to find funds to pay any increase backdated to the rent review date, usually with base rate interest added.  Therefore, the current status is quite favourable to a landlord who can gauge any advantage it might achieve from implementing a rent review against the market and expenses of doing so.

• What is proposed by the Bill regarding rent reviews?

Any new commercial property lease occupied by a tenant for the purpose of its business would be overridden by the proposed Act, where the lease provides for a rent review based on market rentals that is upwards only, or where it is based on a tenant’s turnover in a similar fashion. This would mean that instead the rent can go up or down at review, notwithstanding what the lease says. That said, a lease rent review provision drafted so that stepped and defined rent figures are set out over the term will not be overridden according to the Bill, as it does not table this scenario.

Some leases, at this time, provide for what are termed ‘caps’ and ‘collars’. A cap and collar rent review effectively gives a figure that the rent on review will not fall below and a figure that the rent on review will not go above, notwithstanding that the rent review will be based on market rent. The Bill does not table the position on capped and collared rent reviews, so it is unclear whether those will be banned also.

• When the Bill becomes an Act, will the tenant be able to call for implementation of a rent review?

The Bill gives a tenant the right to take action to trigger the rent review at the date specified in a new commercial lease. Therefore, a tenant would, no doubt, be advised to take this action in a downward market to avoid any surprise increase after the review date, where the tenant would be obliged to pay the landlord the difference plus interest, as is the current status.

• Will the ban on upwards only rent reviews apply to all commercial leases?

The Bill does not table that the proposed Act will be retrospective.  Therefore, leases in place before the Act is passed, with upwards only rent reviews, will not have the provisions of those rent reviews overridden.  The Bill specifically targets commercial leases used for a business of a tenant in occupation, so will not be relevant to head leases where the tenant of that lease is not in occupation.  The tenant in occupation is one either in occupation under a head lease or in occupation by a sublease.

• What might landlords do to circumvent the ban?

Although the Bill does not allow for landlords and tenants to contract out of the ban on upwards only rent reviews, it is most likely landlords will consider shorter lease periods where no rent review is provided for.  Such leases will also most likely be excluded from the security of tenure provisions of Part II of the Landlord and Tenant Act 1954 relating to commercial leases.  Sections 24-28 of that 1954 Act give tenants security to call for a new lease at the end of the term of their lease; if a landlord cannot show grounds for not doing so (such specific grounds being set out in that Act), they are entitled to a new lease from their landlord on similar if not the same terms as the expired one and the court can decide the rent based on valuation evidence from either side.

If a lease is both for a short period with no rent review and is excluded from the security for a tenant to call for a new lease, then the landlord would potentially be able to set an upper market rent on the grant of a new lease to an existing tenant.  Of course, the tenant might decide to go elsewhere, but the landlord would at least keep some control over the rent figure it wants to achieve.  

Landlords and tenants are advised to follow the Bill’s progress through parliament and to evaluate what the ban will mean to them, particularly landlords, regarding their rental yields and resultant value of their commercial property investment.  Insofar as values, landlords should take advice from a surveyor.