No more one-way rents: the upwards-only rent review ban is now on the statute book

Upwards-only rent review (UORR) clauses are common in commercial leases. At pre-agreed intervals, the rent is reviewed, and UORR clauses ensure it can only increase or stay the same, even if the market has declined. The new Act removes that upward-only mechanism.

The ban applies to any tenancy that falls within, or can fall within, Part 2 of the Landlord and Tenant Act 1954, including contracted-out leases which do not carry statutory renewal rights. Critically, the test 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.

It 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 are permitted, but the resulting rent must be capable of falling below the passing rent (the rent currently being paid under the lease), not just rising above it.

Any upwards-only provision in a review clause will have no effect. Rather than the higher amount being payable, the rent is determined as if the upwards-only element were not there. This means that the review mechanism operates in both directions, up or down. The Act also gives tenants the right to trigger a rent review, even where the lease allocated that power only to the landlord, and the same applies to referring any dispute for expert determination. Tenants no longer need to wait for a landlord with no commercial incentive to act.

The legislation also contains anti-avoidance provisions designed to catch arrangements that seek to replicate the effect of an upwards-only review. Where a pre-ban superior lease requires the head tenant to include an upwards-only rent review in a sublease, the Act modifies that superior lease so that any rent review in the sublease must be capable of moving both upwards and downwards. This creates a potential rent mismatch between a pre-ban superior lease and a post-ban sublease – a recognised concern in the market.

The commencement date will be set by secondary legislation and is not expected before 2027. The Government's own impact assessment flags 2028 as a possibility.

The Government confirmed during the Lords' report stage that it will consult on the use of rent caps and collars before the ban comes into force.

A collar would limit how far rent could fall on review. For example, with a current rent of £100,000 and a 5% collar, if the open market rent fell to £91,000, the reviewed rent would be £95,000 rather than the lower market figure. The Government has indicated that where a collar is agreed, a corresponding cap on any increase would apply – so in the same example, the reviewed rent could never exceed £105,000. For tenants, the collar limits the downside benefit of the ban; the corresponding cap on upward movement is the trade-off, and one tenants are likely to welcome.

The ban does not apply retrospectively as a general rule. Leases already in existence keep their upwards-only review clauses intact, and that position holds for any lease granted before the commencement date arrives. What the Lords added, however, was a carefully targeted carve-out.

Renewal leases are caught by the ban where the renewal is pursuant to an option 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 the retrospective provision is clear: to ensure that non-statutory renewal arrangements entered into on or after 17 March 2026 (and any subsequent rent reviews during the resulting tenancy) 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. A call option gives the tenant the right to renew; a put option gives the landlord the right to require the tenant to take a new lease. Options to renew are caught whether contained in the lease itself or in a separate document. Reversionary leases (a new lease granted now with a term that takes effect in the future) fall outside this retrospective provision.

The practical effect is straightforward:

• 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.
• A new lease to a new tenant (not a renewal) falls outside the ban if the agreement for lease is dated before the commencement date.

17 March 2026 has already passed – if you are negotiating a lease today that includes a renewal option, the renewal is already caught.

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. In practice, rent-setting mechanics for renewal can no longer be treated as boilerplate and must be actively negotiated now.

Shorter leases give landlords more regular opportunities to re-set rent at market level, without relying on review clauses that the ban will mean will not be relevant in any event. For assets where the income needs to be valued over longer periods, stepped rents and index-linked reviews – both of which sit outside the ban's scope – are likely to feature more heavily in negotiations.

Any investment or asset management model that prices in a minimum rent at review needs revisiting. This is especially true where renewal options are factored into projected income. A two-tier market is already forming – leases caught by the ban alongside those that are not – and valuers and lenders are already working through what that means for pricing, covenant strength and security.

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 1954 Act (renewals granted by a court or agreed under the Landlord and Tenant Act 1954, which give qualifying tenants the right to a new lease at the end of their term) as it does to contractual ones. This means that any new tenancy from commencement, whether agreed between the parties or ordered by a court, will be subject to the ban. Re-gearing now (renegotiating lease terms before expiry), before commencement, is worth considering where an occupier is amenable as it preserves the current structure for longer.