Partner Gemma Stephenson, in our Commercial Property team, explains the latest developments surrounding the ban on upward only rent reviews.
The English Devolution and Community Empowerment Bill (the Act) received Royal Assent earlier this week and, among other things, the Act contains a ban on upwards only rent reviews affecting business tenancies in England and Wales. The Royal Assent does not bring the ban into force immediately, with the date yet to be set but it is expected that the ban will come into force in 2027 or 2028.
When will it apply?
Until recently, the legislation was expected to only affect leases granted after the date on which a ban comes into force. However, a recent amendment introduces a scenario in which the ban will operate retrospectively. Any leases entered into on or after 17 March 2026 which contain an option to renew will be affected by the ban. The lease entered into now can still lawfully contain an upward only rent review, but the renewal lease entered into under the option will be caught by the ban.
Effect on subleases
Another element of the Act which might be surprising is the effect on the requirements surrounding subletting. Whilst leases granted before the ban comes into force can lawfully contain upwards only rent reviews, any requirements within those leases which mean that any sublease must include upward only rent reviews will be void for subleases granted after the ban comes into force. This may mean that the headlease and sublease have different review mechanisms, with the tenant potentially not able to achieve the level of rent from the sublease that they might be paying under the headlease.
Expected implications
Whilst the rent review element of the Act aims to seek fairer rent reviews for tenants, allowing rent to go down as well as up, whether that aim will truly be achieved will remain to be seen. We are more likely to see a shift in the market towards higher initial rents, stepped rents and a preference towards shorter leases.
What should landlords and tenants doing now?
Any transactions being negotiated now should be reviewed as to whether they may be caught by the Act, in particular leases which include an option to renew and agreements for lease where the lease itself might not be entered into until after the Act comes into force.
Landlords will need to consider their portfolios and how they will structure rent in leases going forwards. Tenants may wish to push for a review mechanism in line with the Act which allows for downwards reviews in rent.
Any leases which may be affected by the Act (whether due to it being a lease under an option now or a new lease as we draw closer to the implementation date) should be drafted with the Act in mind so as to not fall foul of the requirements which would then result in the rent review in the lease being re-written by the legislation and the uncertainty will which arise from that.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
