Proposed ban on upwards only rent reviews

How will the ban apply?

Part five of the Act will mean that, in commercial leases covered by the new rules, rent review clauses can no longer prevent rents from falling. The entire clause will not automatically become invalid, instead, any wording that stops the rent from falling below its existing level will no longer apply. The rent will be determined by the agreed review method, whether that is based on market value, inflation or the tenant’s turnover. This means rents can still rise, but they can also fall if the relevant measure decreases.

The changes will also affect subletting arrangements, depending on the headlease. A headlease is best understood as the main lease between a property owner and a tenant, who may then sublet all or part of the property to another tenant under a separate agreement known as a sublease. Under the changes to upwards-only rent reviews, a headlease will no longer be able to require subleases to include rent review clauses that prevent rents from falling, where the ban applies.

This could give landlords and subtenants greater flexibility to agree to a different approach to rent reviews, rather than being tied to the terms set out in the headlease.

Clauses likely to be caught by the ban 

The ban is expected to catch clauses that prevent rent from falling at a review, including those that require the rent to stay the same or increase. This could also include some inflation-linked rent reviews if they are structured to prevent rents from decreasing. 

However, the ban is not intended to stop rents from increasing. Instead, it will allow rents to move both up and down, depending on the agreed review method. For example, an inflation-linked review can still allow a landlord to benefit from rising inflation, provided the mechanism does not prevent the rent from falling when inflation decreases.

When and who will it impact? 

The provisions of the Act are aimed at business tenancies, specifically those tenancies falling within Part 2 of the Landlord and Tenant Act 1954 (the “1954 Act”) or with the potential to fall within that part. This will include leases that are ‘contracted out’, as while the parties have excluded sections 24-28 of the 1954 Act, the tenancy is still one which falls within Part 2.

While the ban is not retrospective, the Act applies the ban to leases granted pursuant to a “tenancy renewal arrangement” entered into on or after 17 March 2026. For example, if an agreement for a lease is entered into on 18 March 2026 and the lease is granted in December 2026, any upwards-only rent review clause in that lease will be ineffective.

As the rules can affect transactions already underway, the ban is already becoming an important consideration in lease negotiations.

How will the ban impact Code agreements? 

Code agreements are agreements that give telecoms operators, such as mobile phone companies and broadband providers, the legal right to install and maintain equipment on someone else’s land or property. Most agreements specifically designed to grant telecoms operators rights under the Electronic Communications Code are expected to fall outside the ban. 

The position is slightly different for older agreements made before the current Code came into force that remain protected under the 1954 Act. Once the renewed lease is completed, however, it becomes a Code agreement, meaning future renewals fall outside of the 1954 Act.

Looking ahead 

The underlying aim of the ban is to protect commercial tenants from perceived overinflated rents in periods of economic downturn, and to help protect our already fragile high streets. Whether it will achieve this aim is another debate, and many have suggested that there are better solutions, but the real impact is yet to be seen.

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