Shockwaves: Proposed Ban on Upward-Only Rent Reviews

Why the quietly proposed potential ban on upward-only rent reviews in England has generated loud reactions in UK commercial property

In an industry where news rarely arrives with fireworks, the UK government’s proposal on 10 July 2025 to ban upward-only rent reviews in commercial leases landed like a bolt from the blue.

Tucked away in Schedule 31 of the English Devolution and Community Empowerment Bill – a document that, on the surface, seems more about councils and voting protocols than property law – this proposal threatens to upend one of the cornerstones of UK commercial property leasing.

No consultation. No advance warning. No time to prepare.

It’s no surprise, then, that the British Property Federation (BPF),  and others across the legal, investor and landlord communities, are demanding clarity and consultation. As Melanie Leech, Chief Executive of the BPF, put it, this represents "interference in long-established commercial leasing arrangements without prior consultation or warning".

So what exactly is being proposed, and why does it matter?

What Are Upward-Only Rent Reviews?

An upward-only rent review clause is a common feature in UK commercial leases. It allows the rent to increase at periodic intervals, but prevents it from ever going down, even if market rents fall.

In practical terms, this has long provided investment certainty for landlords and institutional investors. If a retail tenant is paying £50,000 per annum today, the rent may rise to £55,000 in five years’ time, but it will never decrease below £50,000, regardless of economic conditions, market downturns or tenant performance.

This one-way ratchet has been both a financial lifeline and a financial burden, depending on your perspective. And it’s this tension that makes the proposed ban so significant.

What the Proposal Actually Says

The ban, if enacted, would apply only in England and only to new commercial leases signed after the legislation becomes law.

Key points:

• It does not affect existing leases, nor those already agreed before enactment.

• It applies to leases where the tenant occupies the premises for business purposes.

• It covers any open rent review clause where future rent is to be determined by reference to unknown variables such as market comparables, inflation indices or turnover performance.

• It does not affect stepped or fixed rent increases, where future rent levels are pre-agreed at lease outset.

• It may exclude premises not directly occupied by the named tenant, such as sublets or investment holdings.

• It applies whether or not the lease is protected by the Landlord and Tenant Act 1954 – though that Act primarily governs lease renewal rights, not rent-setting mechanisms.

Why Is This Causing Concern?

Let’s unpack the implications from the perspectives of tenants, landlords, investors and the broader UK economy.

1. From the Tenant’s Point of View

On the surface, tenants might welcome this move. After all, who wouldn’t want the possibility of rent reductions in times of hardship?

Long leases with upward-only clauses have historically crippled many retailers. Consider Woolworths, Debenhams and countless others that were tied into 10–25-year leases signed during economic highs, only to be crushed by inflexible rental obligations as market conditions changed.

Had their rent been allowed to adjust downwards at review, would they have survived? Possibly. For many, the inability to flex with the market was the final straw.

Even now, modern occupiers often choose shorter lease terms to avoid long-term liabilities and to retain the option to renegotiate in changing circumstances. Upward-only clauses have therefore become an obstacle to flexibility and resilience.

But the picture isn't black and white. Not all retailers are agile, well-funded chains. Many independent businesses rely on lease certainty, and ironically, more flexibility on rent reviews may actually lead landlords to seek tighter conditions elsewhere – longer leases, personal guarantees or more robust covenants. In some cases, landlords may demand upfront premiums (so-called "key money") for lease access in high-demand locations.

So while the change might offer short-term relief, it could result in long-term complexities for tenants negotiating new leases.

2. From the Landlord’s Point of View

Landlords, understandably, are less enthusiastic. For them, upward-only reviews provide a predictable minimum yield, a foundation upon which everything from lending arrangements to pension valuations is based.

Remove that certainty and you alter the nature of the investment entirely. What was a stable, bond-like income stream becomes volatile, performance-linked and less bankable.

Many landlords will argue that the system already accommodates negotiation. Tenants are not forced to sign upward-only leases; they do so as part of broader commercial discussions. And in truth, many tenants use their renewal rights under the 1954 Act to move to market-corrected rents every three to five years.

The government’s proposal might force landlords to tighten other terms or raise rents upfront to compensate for future risk. In some cases, it might simply deter investment in the sector altogether.

3. From the Investor’s Perspective

This is where things get even more sensitive.

Institutional investors – such as pension funds, insurance groups and sovereign wealth vehicles – are major players in UK commercial real estate. Their return assumptions depend heavily on predictable, upward-only rent growth.

Think of it like this: they aren’t just buying bricks and mortar. They’re buying a structured cash flow. Remove the ratchet, and you introduce downward risk. That changes how these assets are priced, funded and underwritten.

And if you believe that sounds niche or removed from daily life, consider this: your pension may be directly affected.

If commercial property assets become more volatile, funds may be forced to either reallocate away from property or accept lower valuations. Both outcomes could have knock-on effects for pension stability and payouts in years to come.

4. Implications for the UK Economy

The UK has long been regarded as a safe haven for property investment, underpinned by clear legal frameworks and stable leasing models. This proposal risks unsettling that confidence.

Any move that alters the perception of risk – especially one made without industry consultation – could undermine inward investment, particularly from international capital. Developers may pause projects, banks may tighten lending, and insurers may raise premiums to cover new uncertainties.

Even though the change seems narrow – just one clause in one part of one lease type – the ripple effects could be broad.

Markets don’t just react to facts; they react to signals. And this signal suggests unpredictability.

Why the British Property Federation (and Others) Want Consultation

The BPF’s call for consultation is not about defending an outdated model or opposing tenant fairness. It’s about process, partnership and long-term planning.

Major industry changes need open dialogue. A clause that has underpinned decades of lease investment can’t be discarded in a footnote to a bill about local governance.

The industry is asking:

• What modelling has been done to assess the financial impact?

• How will landlords recoup the potential downside risk?

• What protections are in place for pension funds and REITs?

• Will transitional mechanisms be introduced?

• Are there alternative, balanced solutions (such as rent collars or capped reviews)?

Loopholes and Legal Grey Areas

Already, legal experts are spotting potential workarounds.

One is the use of "rent collars", which set a minimum threshold for rent reviews – say, the higher of open market rent or 2% above the previous rent. Technically, the outcome is known at lease commencement, so may fall outside the scope of the ban.

This could give landlords a backdoor ratchet. While not entirely circumventing the rule, it does dilute its intent.

And if landlords feel backed into a corner, we may see a wave of innovation in lease structuring – from turnover rents with minimum bases to hybrid lease types with variable elements embedded.

Where Do We Go From Here?

The proposal is still a bill, not a law. It faces further readings and amendments. Its final form is unknown, and it may not survive at all.

But the debate is important. It goes to the heart of how we balance tenant protection with investor confidence. How we modernise commercial leasing without destabilising a sector that underpins everything from town centre regeneration to retirement income.

In an industry where lease structures are more than just legal jargon – they’re mechanisms that affect jobs, businesses, pensions and investment decisions – change must be handled with care.

Final Thoughts

There’s no doubt that the upward-only rent review model has flaws, particularly in a post-Covid, post-Brexit, post-austerity world where flexibility matters. But scrapping it without consultation risks creating more problems than it solves.

What’s needed now is balanced discussion, informed legal insight and open ears from policymakers. Because whether you're a tenant trying to survive in a changing high street or a pensioner depending on the returns from a stable asset class, the consequences of this clause echo far beyond the lease itself.

What’s your view?
Join the conversation on our social channels or message us on ThatRetailPropertyGuy with your thoughts. And for full guidance on the bill, see the specifics on the official UK Parliament site here.