The English Devolution and Community Empowerment Act 2026 has officially outlawed upwards-only rent reviews for commercial leases in England and Wales. Once the ban comes into force, landlords and tenants must negotiate flexible two-way reviews, fundamentally shifting the risk balance in the commercial property sector.
Traditionally, the commercial real estate market in England and Wales has relied on upward-only rent reviews. These mechanisms ensured that even if market rents were falling, a business’s rent could only increase or remain the same – it could never decrease. While this provided institutional investors with guaranteed, predictable income, it often locked high street retailers and small businesses into above-market rents regardless of a slowing economy.
This is probably the biggest change to commercial leases since the Landlord and Tenant (Covenants) Act 1995 which was introduced to outlaw indefinite lease guarantees.
A Shift Towards a European Norm?
By making upward only rent reviews unenforceable and forcing rent reviews to operate on a two-way (up or down) basis, it could be said the government is aligning itself with broader European norms. In some EU jurisdictions, most notably following precedents like Ireland’s 2010 abolition of one way rent reviews, a move towards regulating rent reviews has emerged.
What This Means for the Market
This pivot toward European-style tenant parity has a distinct political dimension, signalling a strong legislative push to protect everyday high street businesses and level the playing field between occupiers and landlords. It is hoped the new approach will rejuvenate the high street, but will it lead to shorter leases and less security of tenure for tenants? And what will be the effect on commercial lending, which is so closely linked to assumptions about maintaining income and debt/interest cover?
Although the ban is not yet active (expected to come into force via further regulations), we believe it is already having an impact on active lease negotiations and heads of terms. Landlords might want look to other ways to protect their income security, such as requesting higher initial rents or reducing upfront incentives such as rent free periods but it is of course a question of what the market will bear. Investors might prefer to wait until the rules have been clarified – secondary legislation will be needed and, for example, it is not clear if index linked rents that are subject to the usual collar or minimum increase will be caught.
Looking to the Future
Very broadly the ban will apply to all new commercial leases and lease renewals. Whether you are a landlord managing a mixed-use portfolio or a tenant preparing for upcoming lease negotiations, strategic advice is vital.
In the short term at least, we might well see a two tier market emerging, perhaps with tenants who are currently on upward only rent reviews finding it difficult to dispose of their lease.
To understand how these evolving legislative changes impact your property assets or lease agreements, feel free to contact us.
