Which leases will be affected?
Once the relevant provisions of the Act are in force, upwards-only rent review mechanisms will be prohibited in new and renewal business leases in England and Wales to which Part 2 of the Landlord and Tenant Act 1954 is capable of applying (including contracted out leases).
The test to determine whether Part 2 applies to a lease, for the purposes of the Act, is whether the lease permits business occupation, not whether the tenant is actually occupying for business purposes at the time of the review. The ban therefore applies even where the tenant is out of occupation, has sublet the premises, or is occupying otherwise than for business purposes.
Certain types of leases may be exempt, such as agricultural leases.
Will all upwards-only rent reviews be caught?
The ban catches any rent review where, on the date the lease is granted, the new rent is not yet known and cannot yet be determined — so "stepped" rents with pre-agreed increases are not caught, but index-linked reviews are within scope. Index-linked reviews could be permitted, but the resulting rent must be capable of falling below the passing rent, not just rising above it.
The government has signalled that forthcoming guidance is expected to clarify that rent review clauses permitting adjustment to the higher of two upwards/downwards review mechanisms will be permissible under the new regime.
Further there is to be a consultation on the use of collars and caps and how these will operate once the ban is in force.
Leases in existence prior to the ban coming into force
Business leases in existence prior to the ban coming into force will not be caught. A business lease pursuant to an agreement for lease entered into before the ban comes into force will also not be caught provided that it does not constitute a renewal arrangement as set out below.
Limited retrospective element: Why 17 March 2026 already matters
An important amendment introduced in the House of Lords means the ban will have limited retrospective effect. Renewal leases are caught by the ban where the renewal is pursuant to an option contained in an agreement dated on or after 17 March 2026. The ban covers both the rent payable on day one of the renewal lease and any rent reviews during the renewal term. The purpose of this provision is clear: to ensure that non-statutory renewal arrangements entered into on or after 17 March 2026 are subject to the ban, closing off what would otherwise be an obvious route to avoidance.
The retrospective provisions apply to both call options and put options, and also to any separate agreement with an existing tenant for a future tenancy of the same premises. Importantly, reversionary leases — a new lease granted now with a term commencing in the future — fall outside this retrospective provision.
A lease granted now can still include an upwards-only rent review during its current term, but if that lease also contains a renewal option, the renewal lease will be caught by the ban whenever it is exercised.
Landlord or tenant to be able to instigate rent review
Where a lease contains a rent review mechanism that can only be triggered by the Landlord, the Act enables the Tenant to trigger that rent review as well. This is to stop the landlord from only triggering a review that will result in a higher rent.
How will the ban work?
The Act will make any upwards only rent reviews unenforceable where the reviewed rent is not fixed or ascertainable at the start date of the lease.
Rather than the higher amount being payable, the rent is determined as if the upwards only element is not there.
Tenants will have a statutory right to apply for declaratory relief or have the lease modified.
Impact on the market: A more nuanced picture than it first appears
Although the Government's aim is to shield business tenants from rents that remain artificially high when market rates fall, market evidence indicates the actual effects will be far more nuanced. Upwards-only rent reviews have traditionally offered stability for investors and lenders, particularly in an inflation-prone market. The removal of this mechanism is expected to prompt landlords and lenders to adjust their approach, likely resulting in shorter lease durations, increased headline rents, more frequent rent reviews, and greater use of index-linked or stepped rent arrangements. Ironically, these alternatives may ultimately lead to higher costs for tenants than the previous upwards-only system.
The ban is anticipated to have minimal effect on high street retail properties, where short leases without review provisions are common. The greatest impact will be felt in sectors such as offices, retail parks, logistics and industrial properties, where longer leases and upwards-only rent reviews are commonplace. Furthermore, index-linked rent reviews could offset the intended benefits of the ban, especially if inflation surpasses open market rental increases.
From an investment perspective, reduced certainty over rental income may influence yield calculations and lending criteria, potentially leading to tighter asset management and a decrease in development activity. This could exacerbate the existing shortage of commercial property and drive rents higher over time. The market is likely to display a two-tier structure, with leases affected by the ban and those that are not, raising complex issues for valuers and lenders around pricing and security.
What landlords and tenants should be doing now
For landlords:
The immediate risk area is live transactions that include renewal options. Any option granted on or after 17 March 2026 brings the renewal lease squarely within the ban, affecting both the opening rent and all future reviews. Rent-setting mechanics for renewal can no longer be treated as boilerplate and must be actively negotiated now.
Landlords need a clearer and earlier plan for managing occupier relationships and demonstrating rental value at renewal. The ban applies equally to statutory renewals under the Landlord and Tenant Act 1954 as it does to contractual ones. Re-gearing now, before commencement, is worth considering where an occupier is amenable, as it preserves the current UORR structure for longer.
Consider whether the forthcoming consultation on caps and collars, and on index-linked review structures, provides an opportunity to engage with the Government on the practical implications for investment property.
Review the terms of any funding agreements to identify whether they impose conditions requiring leases to include upwards-only rent review clauses as a prerequisite for permitting lettings.
For tenants:
Rents can now adjust to reflect falling markets, reducing the risk of tenants being locked into overrented premises during economic downturns. Tenants will also receive a statutory right to actively trigger rent reviews. However, in prime properties landlords are likely to seek higher starting rents or index-linked increases as compensation for the loss of upwards-only protection.
Model the total cost over the term carefully before agreeing to any alternative mechanism — stepped rents and index-linked reviews may not always represent a cheaper outcome than the previous position.
Ensure any renewal arrangements entered into on or after 17 March 2026 are reviewed carefully in light of the retrospective provisions.
An important caveat: Political risk
The Act banning upwards-only rent review (UORR) clauses has received Royal Assent, confirming the legislative direction but critically not yet bringing the ban into practical effect. The implementation depends on secondary legislation, introducing political risk; a future government could delay, amend, or reverse the ban before commencement. Questions remain regarding the precise operation of the ban, particularly its impact on longer-term institutional leases versus short-term high street lettings, and whether alternative rent structures may actually benefit occupiers.
Industry stakeholders have highlighted that the ban received limited Parliamentary scrutiny. The Government has promised further consultation on key issues such as caps and collars and index-linked review structures, which are crucial for maintaining investment in commercial property. Both landlords and tenants should prepare for the ban’s eventual implementation but remain vigilant for developments in secondary legislation and guidance, especially regarding the upcoming consultations.
We will continue to monitor developments and keep you informed. In the meantime, please do not hesitate to contact us to discuss how these changes may affect your specific portfolio or transaction.
We are hosting a topical discussion on UORR. For more information please contact Kirsty Siviter
