Proposing to ban upwards only rent reviews in commercial property leases
On 10 July 2025 the Government introduced the English Devolution and Community Empowerment Bill to effectively outlaw upwards only rent review clauses in commercial property leases in England and Wales. The Bill is at the very outset of the Parliamentary process, and it is anticipated there will be lobbying and pushback from the entirety of the commercial property sector.
The government’s aim in introducing the ban is to “make commercial leasing fairer for tenants, ensure high street rents are set more efficiently and stimulate economic growth”. The Ministry of Housing, Communities and Local Government are of the view that the driver behind the proposed provision is that upwards only rent reviews can make rents unaffordable for tenants, artificially inflating rents and pricing small businesses out of town centres. If the Bill becomes law, the requirement for rent not to decrease will be unenforceable and the new rent at the rent review will be determined by factors in line with changes to the retail price index. Which means the new rent could be higher, lower or the same as the previous rent. Traditionally, most commercial property leases provide for the rent to be reviewed every 3 or 5 years on an upwards only basis which means after the rent has been reviewed the rent will never be less than the amount it was before the review.
Key points to note:
- The ban does not apply to existing leases entered into before the Bill comes into force – but will apply to lease renewals.
- The ban will apply to all new commercial leases occupied by a tenant for the purposes of its business.
- The ban may not affect leases where the tenant has vacated the property or sublet them.
The proposed ban is set out in Part 5 and Schedule 31 of the Bill and that the prohibition on upwards only rent review would only apply where the following four conditions are met:
- Condition A – the lease is a business tenancy (with very limited exceptions – but the Secretary of State is given power to later grant exemptions in regulations).
- Condition B – the lease is granted after the prohibition comes into force (i.e. it will not apply to existing leases – but it will apply to renewals).
- Condition C – the lease contains “relevant rent review terms” – meaning provision for increase of rent to a sum that cannot be calculated at the grant of the lease (which would obviously include open market, index linked reviews and ratchet turnover base rents).
- Condition D – the method for determining the new rent includes two elements (even if it also includes other elements). Element 1 is that a “reference amount” of rent is calculated by reference to the amount of inflation or any other index or multiplier or the tenant’s turnover. Element 2 is that the amount of the new passing rent will be (or could be) different to the reference amount. Condition D is therefore met even if only part of the rent is subject to the method.
We will need to wait and see how the Bill is amended as it progresses through Parliament and if it becomes law. Currently the date for the second reading has not been set – Hunt & Coombs Solicitors will be monitoring the progression of the Bill closely and will publish updates accordingly.
If you would like to discuss further, please contact our commercial property team on 01733 882800 or email [email protected].
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