Upcoming Ban on Upwards-Only Rent Reviews in Commercial Leases

This is the first in a series of short articles examining aspects of the upcoming ban on upwards-only rent reviews ("UORRs") in commercial leases. Here we set the scene and explain why 17 March 2026 is significant as a "look back" date for contractual lease renewals. Later in the series, we will outline factors for landlords and tenants to consider in lease negotiations and look at ripple effects this new law may have, intended or otherwise.

Developments to date

The UORR ban is set out in the English Devolution and Community Empowerment Bill, introduced to Parliament in July last year. The idea had been in the wings for a while, but it is evident from industry commentary at the time that its inclusion in that Bill, without prior consultation, was unexpected. This part of the Bill will apply to both England and Wales.

The draft legislation takes the form of new schedules that will be inserted into the Landlord and Tenant Act 1954. The broad concept is that it will apply to business leases.

What is changing?

Landlords and tenants will still be able to include familiar rent review mechanics e.g. open market valuation ("OMV"), indexation and turnover rent provisions. The rent amount worked out by reference to these methods is called the "reference amount". However, if there is an upwards-only element in the drafting, it will be disapplied. Instead, the outcome of the rent review will be the reference amount. Fixed rents and stepped rents are unaffected.

Interestingly, there is scope to create exceptions to the basic rule through secondary legislation. In the explanatory notes to the Bill it says, for example, that an exception could be made to allow for caps and collars. The Government has been urged to carry out a consultation before secondary legislation is made to give the industry a chance to input.

What is the timeline? 

As at 22 April 2026, the Bill has reached the final stages, so Royal Assent may not be too far away. However, if we are to have a consultation plus detailed secondary legislation then the provisions will not come into force immediately. This tallies with the Government's own impact assessment, which assumes 2027/8 implementation.

What is the significance of 17 March 2026? 

At the time of writing, this date is embedded in the draft Bill as a cut-off date in relation to contractual renewal leases. To explain, the ban is not generally going to be retrospective. So, a lease granted before the provisions come into effect, or under a prior agreement for lease, would not be caught. If such lease has an UORR mechanism that will still be effective i.e. UORR will be with us for some time to come. 

However, a future lease granted under contractual renewal provisions embedded in leases granted after 17 March 2026 will be in the scope of the ban. This is the case whether it is structured as a put or call option for the renewal lease.

To illustrate, if a current lease is for a term of ten years with an UORR at year five, that can be upwards-only. However, if the lease contains contractual renewal provisions for a further ten-year lease, say, with an UORR on day one and at year five, the upwards-only element will not work in that future lease. 

Could a landlord set up a final day upwards-only OMV rent review to fix the day one rent in the contractual renewal lease? Weighing against that idea, the key term "tenancy renewal arrangements" is drawn pretty widely. 

How best then to establish the rent in a future lease? 

A landlord may decide that it is prudent to include indexation in the rent review mechanics, particularly in this scenario where we are looking at a day one rent amount in ten years' time. That far in the future it is difficult to say what an open market valuation would yield. If the Government does allow for caps and collars by way of secondary legislation, that would take out some of the uncertainty for landlords and investors, but we will have to see. 

In our next article, we will consider landlord and tenant perspectives on the upcoming ban.