Simon Sherwood, real estate partner at Mills & Reeve, examines how the Government’s proposed ban on upwards‑only rent reviews could reshape the commercial property market, and what it may mean for private landlords, families and investors with long‑term property holdings.
On 10 July 2025, the English Devolution and Communities Bill was introduced to Parliament. While the Bill’s wider aim is to devolve more powers to local authorities and stimulate regional growth, one provision has attracted particular attention from property owners and investors.
The Bill proposes amendments to the Landlord and Tenant Act 1954 that would, in effect, ban upwards‑only rent review provisions in most new business tenancies. Although the legislation is still progressing through Parliament and may yet change, its direction of travel is clear: a long‑established feature of UK commercial leases may soon fall away.
What is being proposed?
The proposed ban would apply to most new business leases, whether or not they benefit from security of tenure, where the rent review mechanism means that the rent cannot be determined at the outset of the lease. This includes open market rent reviews, index‑linked reviews, inflation‑linked reviews, multiplier‑based reviews and turnover rents.
Under the proposals, rent reviews would need to be genuinely upward or downward. Mechanisms designed to ensure that rents can only ever increase, or at least not fall, would be rendered void. Anti‑avoidance measures are also included, preventing landlords from using side agreements or procedural controls to achieve the same result in practice.
As currently drafted, the ban would not apply retrospectively. Existing leases would remain unaffected, and the changes would only apply to new tenancies granted after the legislation comes into force. Certain arrangements, such as stepped rents that are fully ascertainable at the outset, would also remain outside the regime.
Why does this matter to private property owners?
Upwards‑only rent reviews have underpinned UK commercial property values for decades. For private individuals, families and trusts holding commercial property portfolios — whether retail units, offices, industrial estates or specialist assets — the predictability of rental income has been a key attraction.
A move to genuinely upward and downward rent reviews introduces a new element of income volatility. While rents may still rise over time, they may also fall in weaker market conditions. For long‑term holders, this has several potential implications:
- Valuations: Capital values may need to be reassessed where assumptions have historically relied on rental growth ratchets.
- Financing: Lenders may take a more cautious view of future income streams, particularly for highly geared portfolios.
- Asset planning: Portfolio strategies that rely on steady, incremental income growth may need to be revisited.
- Inter‑generational wealth: Families using property income to support succession planning or trust distributions may need to build in greater flexibility.
Lessons from overseas markets
The UK would not be alone in moving away from upwards‑only rent reviews. A useful comparison can be drawn with the Republic of Ireland, which banned upwards‑only rent review provisions in new commercial leases in 2010.
Despite initial concern at the time, the Irish commercial property market has continued to attract investment across a range of sectors. While pricing and lease structures have adapted, the absence of upwards‑only reviews has not prevented long‑term capital from being deployed where assets are well located, well managed and realistically priced.
This experience suggests that a ban does not spell the end of commercial property investment, but rather a shift in how risk is assessed and allocated between landlords and tenants.
Adapting to a new leasing landscape
If the proposals become law, landlords and their advisers will need to think carefully about lease structuring and asset management. Greater emphasis may be placed on:
- Realistic initial rents and fixed stepped increases that reflect long-term sustainability rather than short-term optimism.
- More active asset management to protect rental income and tenant covenant strength.
- Alternative mechanisms for income growth, such as turnover elements or shorter review cycles.
- Portfolio diversification to balance income risk across different asset types and locations.
For private wealth clients in particular, early engagement will be key. Reviewing pipeline transactions, development plans and longer‑term holding strategies now may help mitigate uncertainty later.
Looking ahead
While the proposed ban represents a significant departure from a familiar rental model, it should be seen in context. Commercial property has adapted to regulatory and economic change many times before. For landlords with a long‑term perspective, a focus on fundamentals — location, tenant quality and flexibility — is likely to matter more than the precise mechanics of rent review.
If the legislation is enacted, it will change how risk and reward are shared in commercial leases. With the right advice and planning, private landlords and families can continue to see commercial property as a resilient and valuable component of their wider wealth strategy.
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