The way in which rent reviews are to be assessed is changing. The English Devolution and Community Empowerment Act 2026 (Act) introduced a ban on upwards only rent reviews. The ban is not anticipated to come into effect until early 2027.
What rent review provisions will be affected?
At the current time, most rent review mechanisms are geared on the “higher of” the open market value and the current rent paid. Looking to the future, the Act removes the “higher of” aspect of the review. If the rent following a review is not ascertainable at the date the lease is granted then rent review must allow the revised rent to be increased or decreased. Where a lease has a rent review which is based on open market review, indexation or multiplier linked rent reviews or turnover reviews then they will be caught by the Act and the review will be upwards or downwards.
What rent reviews will be acceptable?
If a rent review is based on stepped rents or other fixed uplifts, then this is not affected by the Act.
Genuine upwards and downwards open market rent reviews or index-linked reviews or turnover-linked reviews will be permitted.
Can you avoid the Act?
The Act also contains anti-avoidance provisions so that the ban will extend to side letters which allow additional rent to be paid if the rent is decreased on review. The Act also allows tenants to trigger the rent review (even if it is not stated explicitly in the lease). Also, neither parties can “contract out” of the Act.
What leases will the ban apply to?
All commercial leases will be caught by the Act if they are granted after the ban comes into effect.
Commercial leases granted before the Act will not be caught, save for any options to renew or tenancy renewal agreement such as put and call options or agreements for lease which were entered into on or after 17 March 2026.
Underleases will also be caught by the Act – If a headlease requires an underlease to contain upward only rent reviews, then this provision will be overridden by the Act.
Genuine licences to occupy are not caught by the Act.
Uncertainty over some forms of review
The Act does not deal with cap and collar reviews and it is anticipated that this will be subject to further consultation by the government.
Looking to the future
Following the Act coming into force, you may find that:
- Higher rents at the start of a lease may be more common as a way of the landlord getting a better rent prior to the exercise of any rent review.
- The use of fixed or stepped rent increases will be used more often than they are now.
- Break options may be used as a way of getting new terms agreed which may be more favourable to the landlord.
Until the ban comes into effect, both landlords and tenants may wish to look at their existing leases and consider whether any renewals entered into since 17 March 2026 may already be caught by the Act.
This is definitely an area to watch closely.