The English Devolution and Community Empowerment Act 2026 (“the Act”) received Royal Assent on 29 April 2026 and includes provisions aimed at banning upwards-only rent review clauses in commercial leases in England and Wales. The Act achieves this by amending the Landlord and Tenant Act 1954 (“the 1954 Act”). Whilst the relevant sections are not yet in force, and no commencement date has been confirmed, the proposed changes are generating significant discussion across the property sector.
This is not just a ‘future’ issue, but, rather, something that landlords, tenants, and agents need to start considering now.
What is an upwards-only rent review?
An upwards-only rent review allows rent payable under a commercial lease, on review, to increase or stay the same, but not decrease, even if market rents have fallen.
For landlords and investors and their lenders, this has historically provided predictable income streams and greater certainty when valuing investment property.
Critics, however, argue that such clauses can leave tenants paying above-market rents during weaker trading periods or economic downturns, discouraging business growth and high street investment. They can also effectively prevent tenants from either assigning or (in the case of alienation clauses prohibiting underlettings at less than the then passing rent) underletting their premises.
What does the Act propose?
The Act introduces provisions which would render upwards-only rent review terms unenforceable in new and renewal commercial leases once the legislation is brought into force.
The ban applies to any tenancy that falls within, or is capable of falling within, Part 2 of the 1954 Act, including contracted-out leases. The test is whether the lease permits business occupation, not whether the tenant is actually occupying for business purposes at the time of review.
The ban catches any rent review where the new rent is not yet known or determinable at the date of grant. This captures open market rent reviews, index-linked reviews and turnover-linked rents. Stepped rents and fixed uplifts are not caught, as the rent payable is ascertainable at grant. Index-linked reviews remain permissible, but the resulting rent must be capable of falling below the passing rent and not just rising above it.
Any upwards-only provision will simply have no effect: the review mechanism will operate in both directions as if the restriction were not there. The Act also gives tenants the right to trigger a rent review even where the lease reserves that power to the landlord.
Importantly, the legislation contains anti-avoidance provisions. For example, modifying superior lease terms that would require a sublease to include an upwards-only clause. Parties will not be able to contract out of the ban.
Key areas of uncertainty remain:
- The commencement date – expected no earlier than 2027, with the Government’s impact assessment flagging 2028 as a possibility
- Whether certain lease structures (such as agricultural or mining leases) will be exempt
- The treatment of caps and collars – the Government has committed to consulting on these before commencement and
- How the legislation will interact with statutory renewals under the 1954 Act
How does the Act affect existing leases?
Existing commercial leases are not affected retrospectively – current upwards-only clauses will remain intact, as will leases granted before commencement pursuant to pre-existing arrangements (such as agreements for lease exchanged beforehand).
However, there is a targeted retrospective provision. Any lease granted to an existing tenant pursuant to a “tenancy renewal arrangement” entered into on or after 17 March 2026 will be caught by the ban. This includes put or call renewal options and any arrangement under which a tenant may be required to take, or may require the grant of, a further lease.
The practical effect is that, if you are negotiating a lease today that includes a renewal option, the renewal lease is already caught by the 17 March 2026 backstop.
How could this change negotiations?
Even before the legislation comes into force, the market is already beginning to adjust its approach to rent review provisions and lease structures.
Historically, upwards-only rent reviews have been embedded within institutional investment and lending models. If landlords can no longer rely on rents moving in only one direction, greater emphasis is likely to be placed on alternative methods of achieving rental certainty.
Potential trends may include:
- Shorter lease terms, giving landlords more regular opportunities to re-set rent at market level
- More fixed or stepped rental increases (which remain lawful as the rent is ascertainable at grant)
- Increased use of genuinely upwards/downwards index-linked rent reviews (noting that these must allow rent to fall below the passing rent to be compliant)
- Turnover-based rents in retail and hospitality sectors
- More frequent rent review provisions
- Increased negotiation around tenant break rights and
- Higher initial rents, as landlords seek to safeguard against market downturns, with potentially fewer incentives (such as rent-free periods) being offered
For agents and valuers, the changes will affect how rental evidence and investment valuations are assessed.
What should landlords and tenants be considering now?
Whilst the commencement date remains unknown, parties negotiating commercial leases should begin reviewing how these proposed changes could affect current and future transactions.
Landlords may wish to:
- Review standard precedent lease wording and consider whether new leases should be contracted out of the 1954 Act to retain flexibility at expiry
- Consider alternative rent review structures, such as stepped rents, or genuinely two-way index-linked reviews
- Assess how changes to rental certainty could affect investment value, debt service coverage, and financing arrangements and
- Consider re-gearing existing leases before commencement, where occupiers are amenable, as this preserves the current structure for longer
Tenants may see greater opportunity to negotiate flexibility within longer-term leases, particularly where market conditions remain uncertain.
Agents and surveyors may find that heads of terms and valuation assumptions become increasingly bespoke, and the emerging distinction between leases protected by existing arrangements and newer leases subject to the ban will need to be reflected in investment advice.
Looking ahead
The ban on upwards-only rent reviews represents one of the most significant changes to commercial leasing practice in England and Wales in recent years.
Although the industry is still awaiting clarity on implementation and scope, particularly the outcome of the Government’s consultation on caps and collars, which will shape what the ban means in practice – the direction of travel is clear. Landlords, tenants and property professionals should be considering now how future commercial lease negotiations and rent review mechanisms will need to evolve in response.
Obtaining legal advice when you agree the terms of the lease will ensure that there are no nasty surprises. For more information on rent reviews in commercial leases get in touch by email or call +44(0)3333 231580.
