The End of Upward-Only Rent Reviews in UK Commercial Leases?

The UK Government has introduced a significant provision within the English Devolution and Community Empowerment Bill (the Bill) aimed at reforming commercial leasing practices. Central to this reform is the proposed prohibition of upward-only rent review clauses (UORRs) in new commercial leases across England and Wales.

UORRs, long embedded in UK leasing norms, prevent rents from decreasing during review periods - even when market conditions soften. The Government’s stated objective is to foster a fairer leasing environment for tenants and curb artificially inflated rents that hinder small business growth.

Legislative Overview

The Bill is currently in its early legislative stages, having received its first reading in Parliament on 10 July 2025. The second reading of the Bill on 2 September 2025 confirmed the Government’s intention to prohibit upwards-only rent reviews in new and renewal commercial leases. If enacted in its current form, the Bill would:

• Apply to all business tenancies across England and Wales.
• Cover all sectors, including retail, office, logistics and data centre assets.
• Extend to both new leases and renewals, including those under the Landlord and Tenant Act 1954.
• Exclude leases granted prior to the commencement of the relevant provision, as well as those executed pursuant to agreements for lease exchanged before that date.
• Permit fixed or stepped rent reviews. The ban targets mechanisms where future rent is not predetermined (e.g. open market, turnover-based or index-linked reviews).
• Introduce anti-avoidance measures to prevent circumvention through side arrangements, collars, landlord-triggered restrictions or put options.
• Empower the Secretary of State to define exceptions via regulation, including permissible parameters for collars and caps. A formal consultation is planned, with potential rules under consideration such as: 
  • A flat rule requiring collars to be no less than 10%, 15%, or 20% of the rent payable.
  • A conditional rule allowing smaller collars if matched by a cap at the same level.

Importantly, fixed stepped rents and genuinely index-linked rents (without collars) would remain permissible. Variable rent reviews could still also be used, but landlords would no longer be assured that rent will never fall below the initial level.

Potential Impact on the Commercial Leasing Landscape

The proposed ban represents a fundamental shift in UK commercial leasing. As the Bill progresses, stakeholders across the property sector are closely monitoring its implications.

The real estate industry has expressed concern over the proposal, citing potential adverse effects on property valuations and investor confidence. Conversely, tenant advocacy groups and industry bodies such as UK Hospitality have welcomed the reform, highlighting the long-standing burden UORRs place on struggling businesses.

Mark Allen, Chief Executive of Landsec - one of the UK’s largest landlords - has endorsed the move, suggesting it offers an opportunity to simplify lease structures and move away from adversarial negotiations based on headline rents and incentives.

During the second reading of the Bill, Members of Parliament broadly recognised the policy’s tenant-friendly approach. However, parliamentary debate revealed a notable deficiency in critical engagement with the wider economic and market ramifications. A recurring theme throughout the discussion was the absence of meaningful consultation with key stakeholders - this omission has prompted concerns regarding the potential for unintended consequences, particularly in relation to investment confidence, rental supply and long-term market stability.

Commercial and Legal Implications

International Perspective 

A comparative analysis reveals diverse approaches to UORRs across jurisdictions:

Conclusion

The Bill successfully passed its second reading in Parliament with a clear majority, marking a significant step forward in its legislative journey. However, the absence of rigorous analysis during debate underscores the imperative for heightened investor vigilance. Despite the Bill’s growing legislative momentum, several substantive concerns raised by commercial real estate stakeholders remain unaddressed.

The Public Bill Committee is scheduled to report its findings to the House by 12 November 2025. This stage presents a critical opportunity for landlords, investors and legal professionals to engage constructively with the legislative process. Active participation is essential to ensure that the final statutory framework adequately reflects the operational and financial realities of the commercial property sector.

The proposed prohibition of UORRs represents a potentially transformative shift in UK commercial leasing practices. While the measure is intended to promote fairness and affordability for tenants, it simultaneously introduces new legal and financial complexities for property owners and institutional investors. As the Bill progresses through Parliament, stakeholders must prepare for a recalibration of leasing strategies, valuation methodologies and negotiation dynamics.