End of upward-only rent reviews, what does it mean for landlords?

This change has been decades in the making, but with a sluggish economy, a soft commercial property market with rising interest rates, the consequences may not be what the government intended?

On 29 April 2026, the English Devolution and Community Empowerment Act received Royal Assent. Buried deep within this wide-ranging piece of legislation which originally came as a surprise to commercial landlords, a ban on long established industry practice, the upward only rent review.

A primary concern is the expanding powers of regional mayors and strategic authorities, a provision in the bill that the commercial property industry had been watching with growing alarm.

For landlords with commercial interests, whether it be a high street shop unit, a light industrial unit or a mixed-use investment, this ban is the most significant change to the commercial property leasing process since the 1954 Landlord & Tenant Act.

The change came with remarkably little parliamentary fanfare or scrutiny. The lead industry body, The British Property Federation (BPF), noted with growing frustration the rent review provision slipped into this Bill. It was debated for a mere 40 minutes in the House of Lords. 

The government’s intentions are perhaps understandable; high streets up and down the land are struggling. Will this reduce the burden on small businesses and tackle the blight of vacant retail premises? 

Will the new law achieve those goals, or as is often the case, will it instead produce a set of unintended consequences that make life harder for both landlords and tenants. It’s a question that will define the commercial property industry for years to come.

Unfortunate timing

The timing seems unfortunate too. Rightmove’s Commercial Insights Tracker for Q1 2026 shows that three out of the four main commercial property sectors saw year-on-year declines in rental demand. Office enquiries are down 3 per cent, leisure is down 11 per cent and retail is down 9 per cent compared to the same quarter in 2025. Investment appetite has stalled along with the wider UK economy. 

There is just one bright spot, the industrial and logistics sector. In this sector both leasing and investment demand has continued to grow along with growing home deliveries and data centre developments. 

Against a backdrop of caution and economic uncertainty, heightened with the outbreak of another Middle East war, a structural change of this magnitude will need careful management if it is not to compound these existing difficulties.

What actually has changed?

Upward-only rent reviews have been a standard feature of commercial leases in England and Wales for many decades. Under this traditional model, the rent payable at a rent review date can rise if local market rents increased, but they can never fall below the existing rent being paid.

That mechanism provided landlords and their lenders with certainty. It gave them a guaranteed income floor, and especially for large pension funds and institutional investors, it gave them the confidence to commit to long-term capital investments in commercial real estate.

The government’s argument is that this structure is unfair to occupiers. Labour ministers have said that upward-only rent reviews “pit landlords against businesses and can make rents unaffordable and cause shops to shut.” This Act, they argue, will help keep small businesses running and boost local economies. It will act to help end the blight of vacant high streets, they say.

Existing leases unaffected

The new law will not affect existing leases. It prohibits upward-only rent review clauses in new commercial leases entered into after the Act came into force (29 April 2026).  For landlords with a lease with an upward-only review clause already in place, that lease continues unchanged.

Landlords entering into a new lease will instead need to decide between agreeing a fixed rent for the duration of the tenancy term or using a rent review clause where the rent can move in either direction, up or down in line with the local market.

The retrospective trap

There is also a significant retrospective element that anyone who has negotiated a commercial lease since mid-March 2026 needs to be aware of. The legislation was amended so that any lease containing a contractual renewal option entered into on or after the backstop date of 17 March 2026 will trigger the ban when that option is exercised. 

A ten-year lease signed in April 2026, with an option for the tenant to renew on the same terms for a further ten years, will contain a perfectly legal upward-only review clause only for the first five-year review period. After that, when the renewal option is exercised, the rent payable at the start of the renewed term and any subsequent review must be capable of moving downwards as well as up. 

The wider market context 

This legislation should be considered with the current market conditions. The Rightmove Commercial Insights Tracker for Q1 2026 provides a useful snapshot of the market today. Leasing demand is weak. For leisure premises it fell by 11 per cent year on year, retail demand dropped by 9 per cent and offices by 3 per cent. Only industrial and logistics recorded any growth. Here leasing demand was up 6 per cent and investment demand was up 13 per cent. 

These figures are measured against strong comparative figures from Q1 2025; total commercial property investment demand, although down 5 per cent year on year, remains 10 per cent above the same point two years ago. Nevertheless, the direction of travel in retail and leisure, precisely those sectors that the upward-only rent review ban is designed to support, is one of declining demand for space. 

The South West figure shows leisure leasing demand dropping by 32 per cent, Scotland 30 per cent and the North East 29 per cent. In retail, London recorded a 19 per cent fall in leasing demand, Scotland 16 per cent and the North East and South West both fell by 14 per cent. These are not insignificant numbers. These markets are already under structural pressure from e-commerce, changing consumer habits and the left-over effects of pandemic, major shifts in how people now use towns and city centres.

Compounding all of this is the recent outbreak of war in the Middle East and its effect on interest rates and energy prices. Several analysts are predicting two or three increases to the Bank of England base rate during 2026. The cost of borrowing for commercial property investment, instead of steadily dropping as was expected pre-Iran, will remain elevated and possibly increasing. 

Rightmove’s Managing Director of Commercial, Andy Miles, stated in the Q1 tracker: at a time when decision-making is already difficult, additional uncertainty in the structure of rental income is unlikely to encourage new investment.

Industry reactions

The reaction from property professionals has ranged from concern to outright alarm. The British Property Federation’s chief executive, Melanie Leech, proffered a measured response on the day Royal Assent was granted. She welcomed the broader devolution framework, but made it clear, her view was that the rent review ban was introduced with insufficient parliamentary scrutiny. 

She commented: “The Act also introduces the controversial ban on upwards-only rent reviews, which, despite significant industry concern, was debated for only 40 minutes in the House of Lords. The government must now keep its promise to consult on the implementation details, including appropriate caps and collars for leases, if they are to mitigate the unintended consequences of this change. This is to ensure that current levels of long-term commercial property investment into UK towns can be maintained, along with the benefits this brings to public and private sector occupiers alike.”

Owen Spencer, senior lawyer (corporate occupiers) at Forsters, (reported by CoStar) said: “Upwards-only rent reviews became the standard for a reason, providing certainty to investors and lenders in a market heavily shaped by inflation risk. Removing the mechanism doesn’t eliminate this risk, it simply forces landlords and their lenders to find new ways to mitigate it. So, what might we see? Shorter lease terms, higher headline rents, more frequent reviews, and increased use of indexation or stepped rents. In some cases, these alternatives may result in increased rental pressures and reduced tenant security. Lack of investor confidence could dampen future development, tightening the already chronic undersupply of stock and driving rents higher still. In many cases, these alternatives may leave occupiers actually facing higher costs than before.”

Lawyers at Osborne Clarke have highlighted the challenge posed by two tiers of commercial lease existing in the market simultaneously. A pre-ban lease that includes an upward-only review clause, may in time come to be perceived as overly onerous by prospective assignees. Potentially this will depress rents on a subsequent review and make the lease harder to transfer. Landlords holding longer leases with multiple review dates will have a genuinely complex risk to manage.

How should landlords adapt?

The immediate priority for landlords is to assess and understand exactly where they stand. Here are some key practical considerations.

Existing leases are unchanged. If you have a commercial lease already in place with an upward-only rent review clause, that lease continues to operate as before. No action is required, though it will be worth noting how the market perceives such leases over time.

New leases require a different approach. For every new letting you enter into since the Act came into force, you will need to decide between a fixed rent, which is simple and certain, but provides no inflation protection, or a market-linked review mechanism that can move in either direction.

Fixed, stepped rents could become more common, providing a degree of income certainty without relying on open market review. Index-linked structures, potentially with caps and collars to limit extreme movements, are another possibility. A cap sets a maximum percentage increase (protecting tenants), while a collar sets a minimum percentage increase (protecting landlords), is usually tied to inflation indices like RPI or CPI.

If you have signed - or are about to sign - a commercial lease containing a renewal option, since 17 March 2026, the rent payable under that renewal will be subject to the ban, even if the original lease itself predates the legislation. This is a detail that requires specific legal attention and advice.

Landlords should consult with their lender at an early stage in lease negotiations. If you have a commercial property mortgage or you are considering acquiring a commercial investment, you should discuss the implications of variable (up or down) rental income with your lender before you commit. 

Banking covenants and loan-to-value calculations have historically assumed upward-only rental growth. This needs to be reconsidered. It is important to have that conversation before you exchange on a purchase.

Legal advice will be more important than ever on lease structure. The relationships between review mechanisms, service charge provisions, break rights and security of tenure under the Landlord and Tenant Act 1954 has always been complex. With the passing of this Act, it has just become a whole lot more so. A consultation with a commercial surveyor and a solicitor experienced in landlord and tenant work is essential on any new commercial letting.

Will the new law work for you?

The government’s aim in this is to revive struggling high streets and reduce the burden on small business tenants, thereby reducing commercial property vacancy rates. These are legitimate aims, but the burning question is, will the chosen mechanism deliver?

The difficulty is the commercial property market and the relationship between landlord and tenant are both complex. It’s underpinned by layers of investment capital, some institutional, some private and pension funds, that require a reasonable degree of predictability.

If the risk profile of commercial property investment increases, some of the investment capital will seek better risk-adjusted returns elsewhere. The result could be less new development, tighter supply of available space, and ultimately higher rents for the very tenants the legislation was intended to protect. 

The Renter’s Rights Act in the residential market, largely effective from 1 May 2026, and the UK's Employment Rights Act 2025, largely effective from April 2026, could both produce these same unintended results.

This new law is not a theoretical concern for the commercial property market. Lawyers at Osborne Clarke have noted that a lack of investor confidence could dampen future development, tightening the already chronic undersupply of stock in some sectors while driving up rents. The industrial and logistics sector, which has been the commercial market’s strongest performer over the last decade, is relatively insulated from this change.  

But retail and leisure, where this reform is targeted, are the sectors where investor confidence is already at a low ebb. It’s where the consequences of a reduced investment appetite could be most acutely felt.

Irony in the timing

Rightmove’s data for Q1 2026 shows that leisure and retail demand for leasing is already falling across most of the UK. So, the introduction of a mechanism which will make commercial rents highly responsive to market downturns arrives just when landlords least need them. 

Landlords letting retail units in provincial town centres are not necessarily raising rents to unaffordable levels in this climate. In many cases, they are already open to accepting below-passing rents, simply to avoid vacancies.

There is no doubt, a market where rents can only ever rise, regardless of economic conditions, can create genuine hardship for occupiers, especially during downturns. The concern for the industry is not necessarily with the direction of travel. It is the lack of adequate parliamentary debate and the absence of a properly worked-out framework. The BPF’s call for the government to honour its commitment to consult on caps and collars, given the way this new law has been applied, is well-founded.

What comes next?

A consultation on implementation is expected in 2027, and full commencement of the rent review provisions could potentially be extended into 2028. There is therefore a transitional period during which the market will be operating with considerable uncertainty about exactly how the new regime will work in practice.

In the meantime, those with commercial property interests should be considering these questions: What are the implications for refinancing or sale if rental income becomes more variable? What lease structures best protect income while remaining attractive to prospective tenants?  

What is clear is, this Act has changed the commercial property landscape. Landlords must take the time to understand the new framework. They must take advice from qualified professionals. Commercial landlords in 2026 must exercise caution when dealing with new lettings, caution in assumptions about rental income, and caution about the pace at which a complex market can absorb a change on this scale. 

[Main image credit: Kindel Media]