Upcoming ban on upwards only rent reviews in England and Wales: what do landlords need to know?

The government's proposal to ban upwards only rent reviews in commercial leases is increasingly likely to become law. The draft legislation, the English Devolution and Community Empowerment Bill, has completed its passage through the House of Lords and is scheduled to return to the Commons this week. Although the relevant provisions have been substantially redrafted since the first version of the bill was published in July 2025, there have been relatively few amendments to their underlying substance, save for those relating to agreements or options to renew, and to subletting arrangements. 

Lease 'renewal arrangements'

The ban will not apply to leases granted before these provisions come into force (including reversionary leases) or those granted pursuant to a pre-ban agreement for lease. However, the bill has been amended to narrow this exception by adding a limited retrospective element to certain "tenancy renewal arrangements", such as where the tenant has an option to renew. 

Such arrangements entered into on or after 17 March 2026 would fall within the ban. These include options or agreements for a renewal lease granted to an existing tenant where (i) the initial rent under the renewal lease is to be determined by a rent review and (ii) that rent cannot be determined when the arrangement is entered into. This would apply whether the tenant is either granted a right to take a new tenancy, or can be required to do so. 

For example, a pre-ban lease can validly include an upward only rent review, but if that lease (or any other document entered after 17 March 2026) contains an option for the tenant to renew on terms which include upward only rent reviews, that renewal lease will be caught by the ban. The rent review provision in the renewal lease will be treated as though the upward only wording was not present, allowing the rent to go up or down.

However, this amendment remains subject to approval by the House of Commons.

Subletting

Currently, commercial leases commonly require any rent review provisions in a sublease to mirror those of the headlease. However, once the ban comes into force, any such requirement in existing leases must be interpreted subject to it and any requirement for an upward only review will have no effect.

Many leases will have been entered into without these restrictions in mind, and landlords may therefore wish to review their leases to identify the potential for any unexpected consequences. Landlords should also take care not to unreasonably withhold consent to a sublease where it is dissatisfied with those terms.

There will therefore be scope for divergence between headlease and sublease rents after the ban comes into force, and it seems likely that a sublease will no longer be treated as a comparable for determining a pre-ban headlease rent, given their differing terms.

Landlords faced a similar "shortfall" issue two decades ago, when the (then) standard requirement for subleases to be granted at a rent not less than the headlease rent, was considered incompatible with new competition legislation. Such “old‑style” provisions are generally regarded as unduly onerous in the current market. Under the proposed ban, this risk of shortfall will be repeated at each rent review.

Superior landlords with creditworthy intermediate tenants may not be overly concerned by the prospect of a rental shortfall, as the intermediate tenant will remain liable for the difference. However, that risk increases where a tenant intends to sublet due to its own financial pressures. There is also potential for a rental gap in the event of forfeiture of the headlease where the subtenant is granted relief or upon the surrender of a pre-ban headlease subject to post-ban subleases, in each case where the subtenant then becomes the immediate tenant. 

Pre-ban leases

It remains to be seen how the market will react to the existence of two different tiers of lease operating simultaneously.

There is a risk that a pre-ban lease, for which the upwards only review provisions remain effective, might be perceived as overly onerous, and in the longer term, out of kilter with the market. This could potentially have the effect of deflating the rent on subsequent reviews, and may also affect the assignability of such leases, which would be particularly problematic for longer leases with multiple review dates.

Post-ban leases

The use of collars (which set a floor below which rent cannot fall) in post-ban leases remains uncertain and the introduction of a limited exception may be explored through consultation. Other review mechanisms, such as calculations based on the higher of the market rent or the retail price index (RPI) would also have to be considered very carefully and may have unintended adverse consequences for landlords due to the drafting of the bill. 

Attempts to draft around the ban also seem unlikely to succeed, as the bill contains strict anti-avoidance provisions.

Timings still uncertain

The House of Commons is due to consider the Lords' amendments this week. Once both Houses have agreed all amendments, the bill will be sent for royal assent, possibly within the next couple of months.

Even after royal assent, the ban will not come into force immediately. The commencement date will be set by future regulations and there may also be a consultation on potential exceptions.

Osborne Clarke comment

The ban on upwards only rent reviews is likely to give rise to a shift in rent structures in commercial leases in England and Wales.

Fixed, stepped reviews may become more common to avoid a gamble with market rents, particularly for investors and lenders seeking stability in income and asset value. Leases may also be offered at a higher starting rent, whether as a protection mechanism for landlords, or because the value of "new style" leases becomes higher than their old, upwards only counterparts. Landlords with large portfolios of medium- to long-term leases are likely to be analysing the potential impact on their income and asset values and considering the merits of different strategies for the future.

Ahead of implementation, we may see a flurry of activity from landlords looking to enter into agreements for lease or reversionary leases to preserve their upwards only review mechanisms for a little while longer. However, this will require buy-in from prospective tenants, probably with opposing views on the matter, and only time will tell how the market treats pre-ban leases once the new regime is in force.