The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026 (“the Act”) and includes provisions at Schedule 37 introducing a ban on upwards-only rent reviews in commercial leases. The reforms represent one of the most significant changes to commercial lease rent review provisions in recent years. While the policy intention was primarily to support high street and retail occupiers, the legislation applies more broadly to all “business tenancies” within the meaning of the Landlord and Tenant Act 1954, including leases that do not benefit from security of tenure.
How will the Ban work?
Under the Act any provision in a lease which requires the reviewed rent to be higher than the “reference amount” will be ineffective.
The Reference Amount is a rent reviewed by any of the following methods:
- The effect of inflation or any other index or multiplier (e.g. RPI, CPIH );
- The actual rent for the premises or a hypothetical/notional market rent; or
- The tenant’s turnover
So the usual provisions in most commercial leases which require the reviewed rent to be the “higher of” the passing rent and the reference amount will have no legal effect. Instead the Act requires that the reviewed rent must BE the reference amount meaning that if, for example, the open market rent were to fall, so too would the reviewed rent.
The position of collars (i.e. minimum levels of rental increase) on the reference amounts are, at present, also ineffective, however the government has said that it intends to consult on this matter further. There is no impact on caps (maximum rental levels) under the legislation.
Anti avoidance provisions mean that attempts to get around the provisions in the Act will have no effect (such as attempts to include rent top ups in side letters).
When will it come into effect?
At the moment, the Act is not yet in force and it has been indicated that the provisions won’t come into effect before 2027 at the earliest. Therefore, any lease granted before the Act comes into force will not be caught by the ban BUT there are a few key points worth noting:
- Leases entered into with NEW tenants pursuant to a “protected pre-commencement arrangement” (e.g. agreement for lease) entered into before the Act comes into force will not be caught by the ban, even if that lease completes after the ban has legal effect. So developments pre-lets should be safe.
- Where there is a Tenancy Renewal Arrangement (such as an agreement for lease, pre-emption or put/call option) with an EXISTING tenant in relation to the premises entered into after 17th March 2026, those renewal leases will be caught by the ban. Both the initial rent determined under the renewal lease and subsequent reviews will be caught.
- The Act confirms that provisions in “Superior Tenancies” requiring underleases to contain upwards only rent reviews will be unenforceable, even if those superior tenancies are entered into before the Act comes into force. This means that if a tenant under a superior tenancy plans to sublet their premises after the ban comes into effect then that sublease will benefit from upwards and downwards reviews. This will be the case even if the upwards only provisions in the superior tenancy are still valid, meaning any intermediate tenant may face a rental shortfall.
What could Landlords consider doing now?
Whilst specific advice should always be taken in relation to individual cases, a Landlord could consider the following in order to mitigate the impact of the ban on upwards only reviews:
- For new tenancies, endeavour to secure longer lease lengths now to postpone the impact of the ban.
- Developers should ensure that all agreements for lease are completed pre 2027 to take the benefit of the protected “pre-commencement arrangement”
- For existing tenancies, ideally bring forward lease renewal negotiations and/or offer the tenant a reversionary lease (i.e. a lease completed now with a term commencement date to take effect after the expiry of the tenant’s current lease – these are not caught by the ban)
And after the ban comes into force?
Given the Act has now received Royal Assent, landlords and tenants should proceed on the basis that the reforms are likely to come into force following commencement regulations. Landlords who have potentially vacant premises or lease renewals after the ban comes into effect could consider the following:
- Shorter lease terms with no review provisions, allowing the parties to renegotiate at the expiry of the term;
- More frequent rent review dates (although note that under the Act the tenant can now initiate rent reviews if the Landlord does not)
- Increased use of fixed or stepped rents and fixed percentage uplifts – these do not appear to be currentlycaught by the ban;
- Switch from open market reviews to CPIH or index linked reviews – whilst this won’t assist if the index falls, there is a much lower risk of this happening than compared with open market or turnover reviews.
- Mutual break options following rent review, although this is likely to be resisted by tenants
- Higher initial rents to mitigate potential losses under later reviews
Any tenants considering subletting after the ban comes into force where the headlease is a pre-ban Superior Tenancy should also consider all of the above.
How Prettys can help
If you are a landlord or a tenant and would like advice on the impact of the ban on upwards only rent reviews then please contact Rebecca Cleal for further advice.
You can view our commercial property services here.
