The proposal
On 10 Jul 2025 the Government introduced the English Devolution and Community Empowerment Bill, it proposes to ban upward only rent review clauses in commercial leases across England and Wales. This will only effect new leases (including renewals) and would ban rent review clauses that do not specify the higher rent at the time of granting the lease (open market, index linked).
The stated policy aims to “make commercial leasing fairer for tenants, ensure high street rents are set more efficiently, and stimulate economic growth”. Backlash from the real estate sector is expected, but the Government’s aim of delivering something for occupiers may result in the proposal becoming law.
How would the ban work?
For the ban to affect a lease, four conditions would need to be met:
- Condition A – The lease is a business tenancy (There are exceptions, but they are limited).
- Condition B – The lease is granted after the ban comes into place (including renewals whether statutory or agreed).
- Condition C – The lease contains the relevant terms – This would be where it states that the rent will increase to an unknown amount that can only be known in the future.
- Condition D – The method for determining the new rent includes at least two elements, the first being a reference amount of rent is calculated by reference to the amount of inflation, any other index, multiplier, or the tenant’s turnover. Secondly the amount of the new passing rent is different to that of the reference amount.
Parties will not be able to contract-out of these restrictions; it has been drafted to include anti-avoidance provisions to prevent circumvention. The Governments intent is to balance reform with stability for existing landlord/tenant relationships. Another point worth noting is that the bill is not limited to retail or high street premises, it is to apply to all commercial property.
Potential impacts of the proposed ban
If this proposal becomes law, then lease terms will have to evolve. Despite not as many leases containing rent reviews due to a trend of shorter leases, there are still a substantial number that do contain these clauses. Landlords may react by including more fixed or stepped rent increases or alternatively setting artificial inflation rates.
Another route that Landlords may go down, especially whilst there is still uncertainty whether the proposal will be passed, is that they will have shorter lease terms and include more break clauses. This allows them to renegotiate at the end of every term, so they will not fall behind the standard market rate.
Next Steps
The Bill is still in its early days, only the first reading has been done with no scheduled date for the second reading. There is still much Parliamentary debate and evaluation to be done before any new law is finalised, after that it will enter the Committee stage where the in-depth analysis takes place. Amendments are made in this stage, which then leads to a third hearing, final moving to the House of Lords which can then go between the houses until finally being passed.
