Proposed ban on upwards-only rent reviews – what we know so far

The UK Government has again taken the commercial property sector by surprise with a bold proposal to ban upwards-only rent review clauses (UORRs) in new and renewed commercial leases. Introduced as part of the English Devolution and Community Empowerment Bill on 10 July 2025, this measure - tucked away within a broader legislative package focused on regional growth and local governance - could mark a significant shift in the landlord-tenant dynamic.

What is being proposed?

The relevant draft provisions are found in Clause 71 of the Bill, which, if enacted would insert Schedules 7A and 7B into the Landlord and Tenant Act 1954. The proposals as they stand would:

1. Prohibit UORRs in new and renewal leases for commercial premises in England and Wales.
2. Permit rent reviews that are:
   • Market-based, but capped at the prevailing market rent, even if that is lower than the current rent.
   • Index-linked, provided the rent can decrease as well as increase.
3. Apply only to leases where the tenant is in business occupation.
4. Introduce anti-avoidance measures, including allowing tenants to trigger rent reviews if landlords fail to do so.

Why now?

The Government’s rationale is rooted in its broader “Plan for Change,” aimed at revitalising high streets and supporting small businesses. Ministers argue that UORRs “pit landlords against businesses,” contributing to unaffordable rents, vacant premises, and declining town centres.

However, the announcement came without any widespread consultation, prompting concern across the property industry that the move could potentially undermine investor confidence.

What could this mean for key stakeholders?

For landlords and investors:

1. Valuation impact: Reduced predictability of rental income may affect asset valuations and lending terms.
2. Lease structuring: Greater emphasis may be placed on stepped rents or shorter leases.
3. Risk of mismatch: Longer headleases may still contain UORRs, while newer subleases might not, creating potential income gaps.
4. Increased litigation: Disputes may arise over the interpretation of the provisions, including any transitional and legacy clauses.
5. Delay: A pause while investors and Landlords get their heads around the proposed changes.

For tenants:

1. Stronger negotiating position: Especially during lease renewals.
2. Protection from market downturns: Rent would be able to fall in line with market or index movements.
3. Simplified terms: Greater transparency and fairness in lease agreements.
4. Higher rents?: Perhaps stepped rents, or higher initial rents will appear more to reduce risks to landlords and this may put further pressure on tenants.

Key legal and practical considerations

1. If the measures are introduced by an amendment to the LTA 1954, the ban will only apply to only to new leases and renewal leases granted within the protection of the LTA 1954, not existing leases.
2. Index-linked reviews would still be permitted, but likely only if the resulting rent can fall below the passing rent.
3. Anti-avoidance provisions would be included, designed to prevent landlords from sidestepping the rules.

Industry reaction

The response has been swift and polarised:

1. Landlords and institutional investors have expressed concern about the lack of consultation and the potential cooling effect on development and inward investment.
2. Small business groups have welcomed the move as a step toward fairer lease terms.
3. Market impact share prices of some major REITs dipped following the announcement.

What happens next?

The Bill is at an early stage and will undergo significant scrutiny in Parliament, where amendments are likely. Industry bodies are expected to lobby for changes, particularly around scope, transitional arrangements, and the treatment of headleases. There is also speculation that the Government hopefully will reconsider or refine the proposals in response to feedback.

Final thoughts

Initiatives designed to support small businesses and revitalise high streets are clearly needed, but the proposed ban on UORRs represents a significant intervention in the commercial leasing market. For landlords, tenants, and investors alike, the coming months will be critical in shaping the final form of the legislation.

We recommend landlords and investors:

1. Review lease portfolios to identify potential exposure from vacant properties or leases due for renewal.
2. Monitor the Bill’s progress and engage with industry consultations.
3. Seek legal advice when negotiating new leases or renewals or funding arrangements.