The UK Government has announced a landmark proposal to ban upward-only rent reviews (URRs) in new commercial leases, marking one of the most significant shifts in property law in decades. Introduced as part of the English Devolution and Community Empowerment Bill (the Bill), the reform aims to rebalance landlord-tenant dynamics and support struggling high streets by allowing rents to adjust downward in line with market conditions.

The Bill was introduced to the House of Commons and given its first reading on Thursday 10 July 2025. The date for the second reading is not yet known. The policy was introduced seemingly without industry consultation.

What are Upward-Only Rent Reviews?

URRs are lease clauses that allow rent to increase or remain static at review intervals – typically every 3 to 5 years – but never decrease, even if market rents fall. While these clauses offer landlords income certainty, they have been criticised for locking tenants into above-market rents, contributing to business closures and vacant retail units.

Key features of the proposed ban

The proposed legislation would:

  • Apply to all new commercial leases and lease renewals after the law comes into force.
  • Exclude existing leases, meaning future URRs will remain valid.
  • Prohibit any rent review mechanism where the rent cannot be calculated at the time of lease grant and is designed to only increase (e.g. open market or index-linked reviews with upward-only clauses).
  • Include anti-avoidance provisions to prevent landlords from circumventing the ban through creative drafting or side agreements.

The law would also empower tenants to trigger rent reviews and invalidate lease terms that attempt to bypass the prohibition.

Rationale behind the reform

The Government argues that previous voluntary codes encouraging alternatives to URRs have failed. By legislating against them, the aim is to:

  • Support small businesses and independent retailers.
  • Revive town centres by making commercial rents more responsive to economic downturns.
  • Encourage fairer lease negotiations and reduce tenant insolvency risk.

However, from a landlord’s perspective there is potential for:

  • Reduced income predictability, especially for investment portfolios reliant on stable cash flows.
  • Impact on property valuations and lending terms, as the proposed ban introduces uncertainty into rental income streams, which are crucial for institutional investors and pension funds relying on predictable returns.
  • Shift in lease structures, with expectations of shorter leases, more break clauses, or fixed stepped rents

Some landlords may respond by seeking leases outside the Landlord and Tenant Act 1954 to retain negotiating power, particularly in prime office and industrial sectors

Possible consequences if the Bill comes in to force.

Reduced lease terms and tenant security

Landlords may respond to the ban by offering shorter lease terms (excluded from the 1954 Act) to retain flexibility in adjusting rents. This could lead to:

  • Less stability for tenants, especially small businesses seeking long-term premises.
  • More frequent renegotiations, increasing administrative and legal costs

Higher initial rents

To offset the risk of downward rent adjustments, landlords might inflate starting rents. This could:

  • Undermine the policy’s goal of affordability.
  • Lead to higher overall lease costs for tenants, especially if market rents decline.

Shift to fixed rent increases

Landlords may adopt fixed stepped rent increases which:

  • Offer predictability but lack responsiveness to market conditions.
  • Could result in higher rents during economic downturns, harming tenants more than URRs would have

Unintended gaps

The proposed ban would apply only to occupational tenants under the Landlord and Tenant Act 1954. This could result in:

  • Intermediate landlords being liable for upward-only rent reviews from superior landlords, while unable to pass those increases to their subtenants – especially where longer term headleases have been granted.
  • Income gaps and financial strain on property owners caught in the middle

What’s next?

The Bill is still in the early stages of the legislative process, with no fixed date for its second reading. It will undergo scrutiny, debate, and possible amendments in both Houses of Parliament. Industry stakeholders are expected to lobby for changes or clarifications, particularly around complex rent mechanisms and transitional arrangements

Conclusion

The proposed ban on upward-only rent reviews represents a bold move to modernise commercial leasing in the UK. While it promises relief for tenants and a potential boost for local economies, it also introduces new complexities and risks for landlords. As the Bill progresses, both landlords and tenants should prepare for a transformed leasing landscape – one in which it will be imperative that tenant protections are balanced with the economic realities of property investment.

Contact us

Whether you are a tenant or a landlord, no matter your circumstances, Ramsdens is happy to provide expert legal advice tailored to your individual needs.

We offer our services throughout the UK, with phone or video consultations, or in person at one of our 11 offices across Yorkshire.

Call us for free on 01484 821 500, email us at [email protected] or find out more about our commercial landlord and tenant services.

 

The above article is for illustrative purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any part of the information given.

Furthermore, the information contained is accurate and up to date as of the date of publication. Readers should be aware that legislative frameworks may have been amended since the original date of publication.