The UK Government has introduced a new Bill, the English Devolution and Community Empowerment Bill, which includes a proposed ban on upward-only rent reviews in most new business leases. This of course will include leases of health and care property. This represents a significant change for the commercial property sector as a whole but particularly for the health and care sector – where such reviews have been the norm for decades.
The proposed changes apply to rent review methods that make the rent unascertainable at the start of the lease, such as reviews by indexation, inflation or multiplier, open market rent reviews and turnover rent reviews. The proposals will also capture “collars” used in rent reviews to prevent rents falling below a certain level although commentary suggests that these may be permitted later as an exception. Fixed or ‘stepped’ rent increases will still be allowed.
The Bill is still in its early stages of parliamentary scrutiny, with the property sector submitting evidence of its impact to the Ministry of Housing, Communities and Local Government. Real estate expert, Peter Collins and banking and finance specialist, Andy King have both written articles discussing the likely impact of these measures on commercial leases and real estate loans.
If you would like to discuss the impact of the proposed ban on your health and care estate, please contact Victoria Hughes-Barker.
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