The English Devolution and Community Empowerment Bill contains provisions which, as explored in an earlier briefing, will prevent landlords from implementing upwards-only rent reviews in commercial leases. The final reading of the draft Bill in the House of Lords takes place today, and will be followed by a final consideration of the proposed amendments. The latest iteration of the Bill contains some changes from the first draft, none of which take into account landlords' concerns. One of them widens the scope of the ban to include tenancy renewal arrangements entered into on or after 17 March 2026.
Landlord alert: scope of ban on upwards-only rent reviews to be widened
Overview
WHICH LEASES ARE CAUGHT BY THE BAN?
1.1 to which Part 2 of the Landlord and Tenant Act 1954 applies or has the potential to apply;
1.2 which are subject to terms pursuant to which the rent payable by the tenant will or may change during the term (whether or not these terms are actually in the lease);
1.3 granted (or varied to include rent reviews) after the relevant schedule comes into force; and
1.4 which are not granted pursuant to "protected pre-commencement arrangements" entered into before the regime comes into force. This term is thought to include agreements for lease but expressly excludes tenancy renewal arrangements (including put and call options) entered into on or after 17 March 2026.
If this provision is implemented, it will mean that "day-one" rent reviews in options to renew with an existing tenant will be caught, as will rent reviews in the renewal lease, regardless of whether the option to renew was included in the lease, a side letter or separate deed.
WHAT WILL HAPPEN TO OPEN MARKET RENT REVIEWS UNDER IN-SCOPE LEASES?
Where rent review provisions refer to a "reference amount" (such as an open market rental value, a turnover rent with a base rent, or an index-linked rent with a collar) those provisions will be disregarded if they would result in the reviewed rent being larger than the reference amount, and instead the rent will be reviewed to that reference amount. In other words, if a rent review under an in-scope lease refers to the new rent being the higher of the passing rent and the open market rent, the revised rent will be the open market rent. This means that an upwards-only rent review will become an upwards-and-downwards review.
WHAT DOES THIS MEAN FOR LEASES CURRENTLY UNDER NEGOTIATION?
Leases which will be granted before the ban comes into effect can still contain upwards-only rent reviews. The timing of implementation is unclear as yet, but will probably not happen this year.
However, if leases granted since 17 March 2026 contain options to renew, there is a risk (although not a certainty, as the Bill is not in final form) that the rent reviews contained in the renewed lease will fall under the new regime. It might therefore be wise to consider alternative rent review mechanisms in the renewal lease, such as stepped increases.
Although the first draft of the Bill's explanatory notes suggested the possibility of permitting caps and collars, this has not found its way into the drafting of the Bill yet.
