• Swindon & Wiltshire Experts
• Tuesday October 21 2025
• Author Name: Louise Campbell

Are commercial property rent reviews getting a shake-up?

The days of upward-only rent reviews in commercial leases could be coming to an end, says property law expert Louise Campbell of Awdry Law

On July 10 the government introduced the English Devolution and Community Empowerment Bill, which came as a surprise to the property industry.

Perhaps it should have been expected, as reform of the existing rent review structures has been on the government’s radar for some time through proposed legislation in 2022 and even during Blair’s government when plans to legislate were shelved in favour of non-mandatory provisions in the RICS code of conduct.

The proposal is to, in effect, ban rent review clauses which only allow the rent on review to stay at the same level or increase it to the current market rent if that is higher.

One other proposal which can be overlooked is that currently leases provide that only the landlord can trigger a rent review, which clearly they would not do if there is a real risk of the rent reducing.

Now the tenant would also have the right to trigger the rent review.

It is important to note that the Bill is not retrospective and so would only affect those leases granted once the Bill becomes legislation.

A lifeline for high streets?

The main principle behind the proposed legislation – and it is important to remember that this is a proposal and has not yet been made law – is to rejuvenate town centres but it also brings in the principle of fairness – both landlord and tenant would share the risk.

When times are good, the landlord reaps the rewards, but when times are hard, the landlord also shares some of the pain.

The agreed principle that rent will only ever go up and never down has been the cornerstone of the UK property market for years.

Rent review clauses generally sit quietly in the final pages of a lease and, as a rule of thumb, are not heavily negotiated.

Whilst this has been the case for many years, for those tenants in the retail and hospitality sectors where traditionally a longer term lease is required due to costly fit-out works, the lack of downward flexibility in the rent if the economy is suffering has long been a source of pain.
Will this apply to all leases?

The majority of commercial leases will be caught by this proposal if they contain rent review clauses where the reviewed rent is not fixed in advance.

Therefore, any rent review clauses which relate to an open market rent review or a review by reference to an index or tenant turnover can no longer be an upward-only review clause, because at the point the lease is entered into, the future reviewed rent cannot be determined.

For leases granted before the Bill becomes legislation, if the lease is renewed after the Bill becomes legislation, that renewal lease will be caught by the legislation and so the rent review clauses will need to be amended.

One point to note is that the legislation will only apply to premises occupied by tenants for the purpose of a business.

Therefore if a tenant sub-lets the entirety of the premises, an upward-only rent review clause in their lease would be enforceable, but an upward-only rent review clause in the sublease would be unenforceable.

This leaves the tenant in the position that they may pay increased rent under their own lease and receive a reduced rent under the sublease.

New rules, new risks

For investors and lenders an upward-only rent review clause provides rental certainty, is the basis of valuations and ultimately underpins many longterm lending arrangements.

It has been seen as a guaranteed income stream at a minimum set level and if that were to change, the fear is that this will have a profound impact on investment and lending.

Investors, especially pension funds, have long seen the clause as a safety net and, without it, cashflow could be affected.

Likewise, lender valuations might lead to a reduction in value which cannot be resolved. This is especially problematic for a landlord with an existing portfolio.

To try and reduce the impact, a landlord may now favour fixed stepped rents whereby the rent throughout the term is set out in the lease when granted, for example £10,000 in year one, £11,000 in year two and so on.

They could also continue using index linked reviews as these would remain lawful if they provided for an upward and downward rent review.

This may be a good option, as in practice it is rare that an index linked rent review provides for a reduction in the rent and a landlord may be willing to take that risk.

It is likely that a landlord would also ask for a higher initial rent to counter the possibility of a future rent reduction.

We can get an idea of what might happen if the Bill is passed from Ireland, which banned upward-only rent review clauses in 2010 as a direct reaction to the 2008 financial crisis, which left many businesses stuck in high-rent premises despite falling market rents.

The accepted position is that lease terms did become shorter so that there was no need for a rent review during the term and they were usually signed outside of the Landlord and Tenant Act 1954.

It can be argued that both of these consequences could be to the tenant’s detriment and outweigh any advantage they may have received from a downward rent review clause. Ultimately, however, the Irish market withstood this change and so it is to be expected that our commercial property market will also.

Ultimately the landlord will need to choose between agreeing fixed rents when negotiating terms and accepting the risk that they are renting the premises out at a reduced rent, or running the risk of an upward and downward rent review.

If the trend following the Bill’s passing is that most leases will be for three to five years and outside the act this is a trend which has been the accepted norm in many sectors for a number of years.

Both landlords and tenants will now need to be mindful of negotiating the terms of any rent review at the stage when heads of terms are agreed and the rent review clause in a lease, once one of the least negotiated clauses, may now finally become the star of the show.

The Bill has now passed the committee stage in the House of Commons and has been slightly amended to address tenant concerns, but the substance of the Bill has not changed.

We look forward to hearing more as the Bill progresses through Parliament.

Louise Campbell is partner and head of commercial property at Awdry Law