The only way is up…or is it? The ban on upwards-only rent reviews

Following our previous insight on upwards-only rent reviews, the ban has now been introduced in The English Devolution and Community Empowerment Act 2026 (EDCEA).

Although the ban is not expected to come into effect until 2027 at the earliest, landlords, tenants and lenders should use this interim period to reassess their investment, operational and risk modelling.

What is the upwards-only rent review ban?

The EDCEA removes the upwards-only effect from rent review mechanisms in business tenancies.

Where the rent payable following a review is not ascertainable at the date the lease is granted, the rent review must allow for the revised rent to increase or decrease.

This means that the following types of rent review will no longer be calculated on an upwards-only basis:

• Open market rent reviews (or reviews with another hypothetical basis).
• Indexation/inflation/multiplier linked rent reviews.
• Turnover reviews.

Provisions that attempt to impose an upwards-only review will be read as though the upwards only element has no effect: if the review produces a lower rent, the tenant will pay the lower amount.

By contrast, stepped rents and other fixed uplifts remain unaffected, because the rent is a known figure from the outset.

Which business tenancies will the upwards-only rent review apply to?

The ban will apply to all commercial tenancies granted on or after the date that the ban comes into effect under the EDCEA (the 'effective date'), provided that the tenant is in occupation of the premises for the purposes of its business at the time of the review (or where the tenant potentially could be).

Importantly, save for certain renewal arrangements, the ban will not be retrospective. It will not apply to:

• leases (including reversionary leases) granted before the effective date; or
• leases granted after the effective date but pursuant to pre-ban agreements for lease or option agreements.

Whilst the ban is not expected to come into force until 2027 at the earliest, there are some immediate considerations:

• Renewal arrangements
  
  To prevent landlords from circumventing the new legislation, the ban will apply retrospectively to certain renewal structures. Where a renewal lease is granted after the effective date pursuant to an option or other agreement entered into on or after 17 March 2026, the renewal lease will be subject to the new rules.
  
  Landlords should therefore consider alternative rent review arrangements when negotiating renewal leases which will be caught by the ban.
• Underleases

Underleases granted after the effective date will be caught, regardless of when the superior lease was entered into.

If the superior lease requires the underlease to include a non-compliant upwards only review, it will be treated as though it permits any compliant alternative agreed between the tenant and undertenant. This removes superior landlords' control over underlease review terms, and could create a divergence between superior lease and underlease rents over time.

Landlords should factor this into the negotiation of new leases and consider whether existing leases may need to be varied to accommodate an alternative approach to rent reviews in permitted underleases (which will depend on the landlord's bargaining power as any amendment to an existing lease will need to be agreed by the tenant).

Anti-avoidance

The EDCEA contains tenant‑protection measures. These include:

• a statutory right for tenants to trigger and pursue rent reviews, preventing landlords from delaying reviews in falling markets; and
• provisions to void arrangements designed to replicate an upwards-only outcome (such as through a landlord put option).

Areas of remaining uncertainty

Collars and caps

A key unresolved issue is whether the EDCEA will permit a measure of downwards protection through 'collars' which limit how far rent can fall at review. For example, it may be possible for a landlord and tenant to agree that the current rent of £100,000 could not fall by more than 10% on an open market rent review. With this type of collar, if the open market rent was determined to be £85,000, the reviewed rent would be collared at £90,000.

The government is due to consult with the real estate industry about this. However, it has indicated that it is likely to treat collars and caps as a package deal ie if collars are permitted, a corresponding cap should operate to prevent the rent from increasing above the same percentage. In the example above, this would mean the reviewed rent could not be higher than £110,000.

Two reference points

MHCLG has informally indicated that the rent could be reviewed to the higher of two review mechanisms (for example, open market and indexation), provided that both measures could potentially lead to a decreased rent.

Now that the EDCEA has been enacted, these areas of uncertainty will need to be clarified through the EDCEA's secondary‑legislation machinery and formal government guidance.

How will the ban affect the commercial property market?

As we noted in our previous insight on upwards‑only rent reviews, these have long underpinned the appeal of business leases to investors and lenders, offering the certainty of a stable rental income throughout the term of the lease. Their removal marks the end of the long-established investment assumption that rents do not fall – a cornerstone of UK real estate investment.

Whilst the removal of upwards-only rent reviews is a meaningful change for the commercial property market, it is not a cause for panic. It is relatively rare to see a downward trajectory in open market rents and, particularly, inflation.

As the market adjusts, we expect to see a shift towards the following:

• Stepped rents are likely to become more attractive because they can deliver predictable uplifts without relying on a variable mechanism that must now operate both ways.
  
  
• Higher initial rents: landlords may seek to protect long‑term income by pushing a higher day‑one rent, potentially offset by longer rent‑free periods or other tenant incentives. It remains to be seen how the tenant side of the market would react to this of course.
  
  
• Index-linked reviews: indexation may also become more prevalent, on the basis that inflation has historically been less volatile than open market rents in many sectors.
  
  
• The use of two reference points and caps and collars (if these are permitted).
  
  
• Shorter leases that are contracted out of the Landlord and Tenant Act 1954 and do not contain rent reviews, allowing the landlord to renegotiate the rent at the end of the term.
  
  
• Leases with a landlord break right on rent review, to allow the landlord to renegotiate the rent or remarket the premises.

The implementation of the ban will bring a period of market adjustment.

However, this is not a cause for alarm. The commercial leasing market has repeatedly adapted to legislative, macroeconomic and geopolitical change, and the tools needed to respond to the ban (stepped rents, incentives, shorter terms and revised review mechanics) are already well understood.

Next steps for investors and lenders

The sensible response for investors and lenders is therefore not to panic, but to plan. Review pipeline transactions and existing structures, and identify which rent mechanics best align with their asset and risk strategy in a post ban market.

In the meantime, it is important to remember that there is nothing preventing upwards-only rent review provisions being included in current leases, before the ban kicks in.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2026