In brief
A prohibition on the longstanding practice of upwards-only rent reviews (based on open market, indexation or turnover) in new commercial leases is set to become a reality after the English Devolution and Community Empowerment Act 2026 (“Act”) received Royal Assent on 29 April 2026. Whilst the ban is not expected to take full effect for some time, landlords and tenants will need to be alive to the changes and any potential implications for their lease planning and documentation.
Key takeaways
- The Act introduces a statutory ban on upwards-only, variable rent reviews in new business leases in England and Wales.
- Once the Act is fully in force, variable rent reviews - where the reviewed amount cannot be determined when the lease is granted - will be capable of review upwards and downwards, regardless of any express contrary provision.
- Existing leases, leases entered into before commencement of the Act, and new leases entered into after the Act takes effect pursuant to pre-commencement lease agreements will be unaffected by the changes.
- Renewal leases granted pursuant to arrangements entered into after 17 March 2026 will be impacted by the ban.
- Stepped (or fixed) rent increases will be unaffected as the rent is ascertainable.
- The provisions prohibiting upwards-only review are not yet in force pending further regulations.
In more detail
In July 2025, we reported on the government’s out-of-the-blue proposal to introduce a ban on the long-held tradition of upwards-only rent reviews in commercial leases. Stakeholders on both sides of the leasing fence were taken by surprise. Notwithstanding, the ban (contained deep within the English Devolution and Community Empowerment Act 2026) has now been confirmed with relatively little amendment from its original form.
Its impact on both landlords and tenants should not be underestimated. When fully in force, the Act will prohibit certain upwards-only rent review clauses in new commercial leases, unless that lease was granted pursuant to an agreement entered into before the Act’s commencement.
The Act’s effects are largely prospective, but make a timing distinction between new and renewal leases.
New leases
The Act will effectively rewrite upwards-only rent review mechanisms where the reviewed rent (when determined by reference to market value, indexation or turnover) cannot be ascertained at the date the lease is granted. In such cases, upwards-only mechanisms will be unenforceable, and rent will be allowed to move down as well as up.
Some upwards-only rent review arrangements will be unaffected by the changes, including:
- Rent reviews in leases granted pre-commencement.
- Rent reviews in leases granted after the Act comes into force but which are anticipated by an agreement entered into pre-commencement.
- Fixed or stepped rent increases identifiable from the date the lease was granted.
Renewal leases
The Act contains different rules for renewal leases.
A renewal lease granted pursuant to renewal arrangements entered into before 17 March 2026 will be unaffected by the Act’s rent review changes and can be reviewed in accordance with the pre-agreed renewal lease terms.
However, where a lease granted on or after 17 March 2026 contains a renewal option, and
- A renewal lease is later granted pursuant to that option, and
- The initial rent payable under the renewal lease is not known and cannot be determined at the time the renewal arrangement was entered into,
the initial rent payable under the renewal lease cannot be subject to an upwards only effect.
Anti-avoidance
In a commercial world used to workarounds, the Act shows its teeth by including deliberately broad anti‑avoidance provisions designed to neutralise drafting techniques and transactional structures that would otherwise replicate an upwards-only economic outcome.
Effect on sub-leases
The Act has significant implications for sub-lettings, in terms of its impact on provisions in existing leases which require authorised subleases to contain upwards-only rent reviews.
Once the ban is in force, traditional landlord “flow‑through” requirements will be disapplied. Superior landlords will be unable to preserve upwards-only economics through alienation controls (e.g., based on requirements for the sub-lease rent to be no less than that in the headlease). That will inevitably lead, in some cases, to a mismatch between rent payable upwards by a head tenant to the freeholder and the rent receivable from its own sub-tenant.
Timing
Timing for formal commencement of the ban is uncertain, with supplemental statutory regulations required. Commentators anticipate that the changes will not be implemented until 2027 at the earliest. The government has also proposed interim consultation on derivative aspects of the legislation, such as its impact on the market’s frequent use of rental caps and collars in rent review arrangements.
There is no doubt that the introduction of these changes is a watershed moment in landlord and tenant relations and letting market economics. Please do not hesitate to contact us if we can help you with review of your current or proposed business lease arrangements, to fully gauge the impact of these changes.