Upwards-only rent review ban: Potential retrospective impact

The English Devolution and Community Empowerment Bill – the legislation that proposes to introduce a ban on upwards-only rent reviews – is currently at the report stage in the House of Lords, with Royal Assent now firmly in sight.  

Those with interests in commercial property, whether as landlords, investors or occupiers, are watching its progress carefully.  

Critically, a recently proposed amendment from the House of Lords means the ban could apply not only to future leases but also to the rent payable at the commencement of a new lease granted under a renewal option contained in a lease entered into on or after 17 March 2026 – giving the Bill a new retrospective element not previously anticipated and with material implications for transactions completing right now. 

Background: The ban on upwards-only rent reviews

The English Devolution and Community Empowerment Bill is currently at the report stage in the House of Lords. Royal Assent is now getting ever closer: the only remaining stages are a third reading in the House of Lords, followed by the Commons considering the Lords' amendments. 

The Bill includes provision to ban upwards-only rent review clauses in new commercial leases in England and Wales. 

The ban is not generally retrospective – it will apply only to leases granted after the new Act comes into force, with a notable exception of some subtenancy arrangements. For the majority of existing leases with upwards-only rent review clauses already in place, the position will remain unchanged. However, a significant carve-out has emerged which all parties to commercial leases entered into from 17 March 2026 onwards should carefully consider.

The retrospective element: Tenancy renewal arrangements

An amendment has been proposed by Baroness Taylor, the Labour peer sponsoring the Bill in the House of Lords. The ban on upwards-only rent reviews would apply not only to rent reviews within a lease, but also to the rent payable at the start of a new lease granted pursuant to what is described as "tenancy renewal arrangements" – essentially put or call renewal options contained in an existing lease.

The effect of the amendment is that the ban would apply to the rent payable at the start of a new lease (and any rent reviews in that new lease) if the relevant renewal option was contained in a lease granted on or after 17 March 2026. 

A practical illustration

To illustrate: if a lease is entered into today – say 20 March 2026 – for ten years, with a five-year rent review and an option to renew on the same terms for a further ten years (and assuming the amendment is passed), the position would be as follows: 

• The rent review on 20 March 2031 can still be upwards-only.
• The "rent review" on 20 March 2036 – being the rent payable at the start of the new lease granted under the renewal option – cannot be upwards-only.
• The rent review on 20 March 2041, falling within the renewed lease, cannot be upwards-only.

This distinction is fundamental. A lease entered into now (or in the last few days) may contain an upwards-only review clause that is perfectly lawful for the first review period, but the renewal option embedded in the same lease will trigger the ban at the point of renewal – meaning the rent at the commencement of the renewed term, and any subsequent reviews within it, must be capable of moving downwards as well as upwards.

What this means for existing and new lease negotiations

For any arrangements that contain a contractual right to renew, it is essential to review the rent review assumptions carefully to ensure that the drafting would work adequately on a downward basis as well as on an upward basis. 

More broadly, for leases generally, parties may wish to revisit rent review assumptions to ensure the drafting covers this potential new position – drafting points that may have been acceptable when there was a floor to the rent on review may no longer be acceptable if rents can also go down.

The market has already begun to consider how it will adapt. Many commentators suggest that index-linked reviews are likely to become the norm, and this tabled amendment will have a more significant impact on sectors that have traditionally resisted security of tenure rights under the Landlord and Tenant Act 1954 and have instead relied on contractual options to renew

With only a third reading in the House of Lords and the Commons' consideration of amendments remaining before Royal Assent, the timetable is short.  The amendment introducing the 17 March 2026 effective date for tenancy renewal arrangements means that any lease with a contractual renewal option entered into from that date is already potentially within scope – even before the Act has formally come into force. Parties entering into new leases or negotiating renewals should proceed on the basis that the ban –and its extended scope – will apply.

Key takeaways

In our view, the aspect of this proposed legislation to be most overlooked will be the retrospective reach of the renewal option amendment – particularly by those whose leases complete in the weeks before Royal Assent.

The consequences, both for rental income modelling and occupier cost planning, are real and immediate. Whilst the headline ban on upwards-only rent reviews has been widely anticipated, the retrospective element introduced by the proposed amendment is more nuanced and its practical consequences should not be underestimated.

For landlords and investors

• Leases entered into on or after 17 March 2026 that contain a contractual renewal option should be reviewed. The rent review mechanism will need to function effectively in a market where rents can move both upwards and downwards.
• Investment appraisals and asset management strategies that assumed a rental floor at review will need to be reconsidered, particularly for longer-income assets where renewal options are a feature of the income profile.
• Heads of terms being negotiated now should specifically address how rent will be determined both at review within the initial term and at the commencement of any renewed term.

For occupiers and retail tenants

• The removal of the upwards-only floor at renewal may, over time, benefit occupiers in markets where rental values have softened. However, it also introduces greater uncertainty in lease modelling.
• Occupiers negotiating renewal options should ensure the drafting of the review mechanism in the renewed term reflects the new statutory position.
• Occupiers entering into leases now with contractual renewal options should understand that, if the amendment is enacted as proposed, the rent at the commencement of any renewed term will not be subject to an upwards-only floor – and lease negotiations, including heads of terms, should reflect this position from the outset.