The New Rent Review Regime

The ban isn’t retrospective. Once it’s in force, it won’t touch existing leases, or leases entered into under agreements that already exist. There is one important exception, though: renewal leases, which I’ll come to below. Landlords, tenants, investors and lenders should all be looking at their current deals and long-term plans with the Act in mind.

What the Act actually does

Any upwards-only element in a rent review clause becomes unenforceable if the reviewed rent isn’t fixed or fully ascertainable at the start of the lease. That covers the review types people use most (open market, index-linked and turnover rents) and turns them into two-way reviews, so rents can go down as well as up.

It applies to all “business tenancies” that fall within, or could fall within, the Landlord and Tenant Act 1954, whether or not the tenant occupies the premises. So superior leases where the superior tenant doesn’t occupy are now caught too.

Subletting clauses in existing leases (those granted before the ban takes effect) that require a tenant’s sublease to include upwards-only reviews will be void. That lets tenants sublet without breaching the ban, but it could leave a mismatch between the review terms in a superior lease and those in its subleases.

We don’t yet know when the ban will apply to new leases. The implementation date hasn’t been set.

The renewal lease catch

This is where the Act bites sooner than many expected. After an amendment proposed by Baroness Taylor was approved, it appears that any renewal lease entered into under a lease granted on or after 17 March 2026 will be caught. That includes renewals granted under a put or call option, whether the option sits in the original lease or in a separate option agreement.

In practice, the starting rent under the renewal lease (and any later reviews) could be capped by the review mechanism, even if that produces a figure below the rent currently being paid under the original lease.

So while existing lease terms are generally protected, these provisions could take effect much earlier than people assumed wherever renewal rights are used. That makes the Act a live issue for lease negotiations happening right now, not just a future reform. One likely response is the use of final-day rent reviews in new leases to get around the problem.

What it means for landlords, investors and lenders

The ban goes straight at income certainty. Yield assumptions and debt service coverage calculations may take a hit, which could change what lenders ask for and how assets are managed. Landlords may push for higher day-one rents to protect themselves against a falling market, and offer fewer incentives such as rent-free periods and capital contributions to keep their upfront costs down. And as noted above, review terms in superior leases and subleases may no longer line up across a portfolio.

What it means for tenants

For tenants, the change is mostly good news, but it comes with trade-offs. Rents will be able to fall with the market, so tenants are less likely to be stuck paying over the odds in a downturn. Tenants will also get a right to trigger rent reviews themselves to enforce the lease’s review provisions. On prime properties, though, landlords may insist on index-linked increases, which can work out worse for a tenant than an open market review.

Landlords may also start favouring shorter leases of three to five years, with break rights, to keep their options open. That’s not ideal for tenants who want certainty, especially if they’ve spent heavily on fit-out.

What to think about now

If you’re negotiating a lease today that includes an option to renew, look at it carefully. Tenants with a strong bargaining position may want to push for review clauses in new leases that reflect the Act now, to avoid arguments over interpretation later.

With agreements for lease, timing and structure could decide whether a deal falls inside or outside the new regime, depending on when the Act is implemented.

Investors and landlords should be modelling long-term rental income across their portfolios and thinking about how best to structure rents going forward. Fixed stepped increases agreed at the outset are still allowed, and they’re likely to become more popular, along with shorter unprotected leases and more frequent re-gearing.

Still unclear

The Act has passed, but no start date has been set for the ban on upwards-only reviews in new leases. The government’s initial impact assessment points to the 2027/28 window, but that isn’t fixed. The government has also promised to consult on caps and collars. That’s welcome, but it could push the timing back further.

Because the Act may still change, take real care before drafting leases in anticipation of provisions that aren’t yet in force.

By Steve Cook, Commercial Property Associate at Parfitt Cresswell Solicitors

I kept every date, legal condition and the byline unchanged, folded most of the bullet lists back into plain paragraphs, and moved the renewal-lease point under its own heading since it’s the most urgent takeaway. I also read “existing superior leases and leases” in the original as meaning subleases, which matches how the article phrases it later; worth a quick check with the author.

donot make a lot of changes pls....maintain the same forma

Upwards-only rent reviews have been a cornerstone of commercial leasing in England and Wales for decades, underpinning valuations, funding models and investment strategies. The English Devolution and Community Empowerment Act (the Act) received Royal Assent on 29 April 2026 and includes provisions banning upwards-only rent review mechanisms in commercial leases in England and Wales. The proposal came as a surprise when it was first made in summer 2025, and recent amendments have sharpened its commercial impact.

The legislation isn’t retrospective, so once in force it won’t affect existing leases (or leases entered into under pre-existing agreements). There is, however, a limited but potentially significant retrospective element for renewal leases, explained below.

Landlords, tenants, investors and lenders will need to review current transactions and long-term investment strategies in light of the Act.

What has changed in the drafting of the Act, and why it matters

The Act will make any upwards-only element in a rent review clause unenforceable where the reviewed rent isn’t fixed or fully ascertainable at the start of the lease term.

In practice, this catches the most commonly used review mechanisms (open market, index-linked and turnover rents) and turns them into two-way reviews, so rents can go down as well as up.

• Who is caught: All “business tenancies” within (or capable of falling within) the Landlord and Tenant Act 1954, whether or not the tenant is in physical occupation of the premises. This means superior leases where the superior tenant doesn’t occupy will now be caught.

• Sub-tenancy provisions: Subletting clauses in existing leases (those granted before the ban takes effect) that require a tenant’s sublease to include upwards-only rent reviews will be void. This lets tenants sublet without breaching the ban, but could create a mismatch between the rent review provisions in existing superior leases and leases.

• When it applies to new leases: The implementation date for these provisions isn’t yet known.

• When it applies to renewal leases: Following the approval of an amendment proposed by Baroness Taylor, any renewal lease entered into under a lease granted on or after 17 March 2026 appears to be caught by the Act. This includes a renewal lease granted under a put or call option, whether in the original lease or in a separate option agreement. As a result, the initial rent under the renewal lease (and later reviews) could be capped by the review mechanism, even if that gives a lower figure than the rent then passing under the original lease.

So while the provisions aren’t meant to be retrospective and existing lease terms are generally preserved, they could kick in much earlier than expected where renewal rights are exercised. This has turned the Act from a future reform into an immediate issue for lease negotiations happening now, and could lead to final-day rent reviews being included in new leases to get around the problem.

Practical implications for the real estate sector

Landlords, Investors and Lenders

For landlords and investors, the ban hits the certainty of their income stream:

• Valuations and funding: Yield assumptions and debt service coverage calculations may be negatively affected, leading to changes in lenders’ requirements and asset management strategies.

• Income structuring: Landlords may ask for higher day-one rents to protect against market downturns, and may offer fewer incentives (such as rent-free periods and capital contributions) to reduce their upfront outlay.

• Portfolio inconsistencies: As mentioned above, rent review provisions in superior leases and subleases may no longer match.

Tenants and Occupiers

For tenants, the change is generally positive, but it isn’t cost-free:

• Downward market protection: Rents can adjust to reflect falling markets, reducing the risk of tenants being stuck in over-rented premises during a downturn. Tenants will also get a right to trigger rent reviews themselves to enforce the lease’s rent review provisions. In prime properties, however, landlords may insist on index-linked increases, which could be less favourable to tenants than an open market review.

• Lease structuring: Landlords may prefer shorter three-to-five-year leases with break rights for flexibility. This may not suit tenants looking for certainty, particularly those who have incurred high fit-out costs.

Key points to consider

• Live negotiations may need a rethink: Any lease being entered into now that includes options to renew should be looked at carefully. Tenants in a strong bargaining position may also want to push for rent review provisions in new leases that reflect the Act, to avoid uncertainty over interpretation later.

• Agreements for lease: Depending on when the Act is implemented, timing and structure may decide whether a transaction falls inside or outside the new regime.

• Planning: Investors and landlords should focus on long-term rental income modelling across their portfolios and think about the best way to structure rents going forward. Fixed stepped rent increases agreed at the outset (which are still permitted), shorter unprotected leases and more frequent re-gearing are likely to become more popular.

Uncertainty remains

Although the Act has passed through Parliament, no start date has been set for the ban on upwards-only rent reviews in new leases.

The government’s initial impact assessment points to implementation in the 2027/28 window, but this isn’t fixed.

The government has also committed to consulting on the use of caps and collars. While this is welcome, it could further affect when the new regime comes into force.

Given that the Act may still change, real care should be taken before drafting in anticipation of these unimplemented provisions.

By Steve Cook, Commercial Property Associate at Parfitt Cresswell Solicitors