On 29 April 2026, the English Devolution and Community Empowerment Act 2026 (the ‘Act’) received Royal Assent. The Act prohibits upwards-only rent reviews in new commercial leases in England and Wales, although the ban will not come into force until a commencement date to be appointed by the Secretary of State (expected to be in 2027).
The key features of the ban are as follows:
- The ban will apply to commercial leases granted after the commencement date of the Act.
- The ban will not apply retrospectively to existing commercial leases currently containing upwards only rent reviews, but will have retrospective effect in relation to certain lease renewals of existing leases (see below update);
- The ban applies to any “business tenancy” as defined in the Landlord and Tenant Act 1954 (“1954 Act”) whether the lease is inside or outside the security of tenure provisions of the 1954 Act;
- It will prevent upwards only rent reviews in commercial leases where the revised rent is not ascertainable at the date of grant, for example open market value or index-linked reviews;
- It does not affect stepped rent increases that are agreed at the start of the lease;
- Tenants will have the right to trigger rent reviews, where the lease says that the landlord reserves the right to initiate the review to the landlord.
Retrospective Effect on Lease Renewals
On 13 April 2026, an amended version of the Bill was accepted by Parliament, which now introduces a partially retrospective element.
The key change is that the ban on upwards-only rent reviews will apply not only to rent reviews within a lease, but also to the initial rent payable at the start of a new lease granted pursuant to “tenancy renewal arrangements” – in essence contractual put or call renewal options contained in an existing lease.
The policy intent is that future leases granted pursuant to option arrangements should be caught by the ban, even where the negotiated form of lease contained upwards only rent review provisions.
The practical effect of this amendment is that the ban will apply to the rent payable at the commencement of a new lease (and any rent reviews within that new lease) where the relevant renewal option with an existing tenant was contained in a lease entered into on or after 17 March 2026.
Accordingly, any agreement for lease, option agreement or pre-emption agreement entered into on or after 17 March 2026 which includes a renewal option with an existing tenant, or which requires an existing tenant to enter into a new lease, will be subject to the ban in respect of both the initial and any future reviews in the renewed lease.
Importantly, this extends not just to renewal options contained within the original lease but also to separate option agreements or agreements, whether in a side letter or separate deed, granted at the same time as or subsequent to the original lease.
Upwards-Only Rent Review Ban Becomes Law – What Is Changing?
For any arrangements entered into from 17 March 2026 onwards that contain a contractual right to renew, it is essential to review the rent review assumptions carefully. In particular, parties should ensure that the drafting functions effectively on a downward basis as well as on an upward basis.
More broadly, all parties to commercial leases may wish to revisit their rent review assumptions and drafting. Provisions that were acceptable when there was an effective floor to the rent on review may no longer be appropriate in a market where rents can move downwards as well as upwards.
Are All Agreements for Lease Affected by the Ban?
No. An agreement for lease entered into with a new tenant (as distinct from an existing tenant) after 17 March 2026 but before the ban comes into force is not caught by the retrospective provisions. In those circumstances, the new lease can still contain upwards-only rent review provisions.
Practical Steps To Consider
- Leases entered into on or after 17 March 2026 that contain a contractual renewal option with an existing tenant should be reviewed. The rent review mechanism in any renewed lease will need to function effectively in a market where rents can move both upwards and downwards.
- Heads of terms currently being negotiated should specifically address how rent will be determined both at review during the initial term and at the commencement of any renewed term.
- Consider whether shorter lease terms or leases contracted outside the security of tenure provisions of the 1954 Act may be appropriate, to avoid the need for rent review provisions and allow more frequent renegotiation of rental levels.
- Consider incorporating fixed stepped rent increases (agreed at the outset of the lease) as an alternative to open market rent reviews, noting that these are not caught by the ban.
- Long-term investment valuations may need to be adjusted to account for the possibility of downward rent reviews on renewal, although it remains to be seen how valuation practice will adapt to reflect these changes.
What About Rental Collars and Caps?
The Act as enacted prohibits rental collars (i.e. minimum rent floors). It is anticipated that the Government will consult on the circumstances in which caps and collars may be permitted, but no specific detail has yet been published.
Any relaxation of the prohibition on collars would need to be introduced by way of secondary legislation. We will provide further updates as the position develops.
Next Steps
If you have any questions about how the ban on upwards-only rent reviews may affect your existing or proposed lease arrangements, please contact the real estate team.
