24 July 2025
SHW - Government Plans Ban on Upward-Only Rent Reviews
Business Rates, Business Space, Commercial, Rent reviews & Lease renewals, Retail & Leisure
In this article, SHW’s Lease Advisory and Valuation experts examine the legal implications of the proposal, its sectoral impact (office, retail and industrial), and the likely consequences for landlords, tenants and investors. We also explore how lease structures, valuations and investor risk appetites may adjust – and outline how market participants might respond.
The UK Government’s new English Devolution and Community Empowerment Bill (introduced July 10, 2025) proposes a ban on upward-only rent review (UORR) clauses in new commercial leases.
Under the draft law, any future open-market, index-linked or turnover rent review must allow rents to fall as well as rise. Existing leases would be unaffected, but all new business tenancies (including lease renewals under the 1954 Act) would fall under the ban. The change – intended to help struggling retailers and small businesses – has taken the market by surprise, prompting a wide range of reactions from surveyors, investors and tenants.
Key Provisions of the Proposal
Scope – New Leases Only:
The ban is to apply only to commercial leases granted after the Act comes into force, including any statutory or agreed renewals. Existing leases remain subject to current rules.
Business Tenancies:
All commercial property sectors are caught. In effect, office, retail, industrial and other business leases in England and Wales will be affected.
Rent Review Mechanics:
Only rent review clauses where the new rent is undetermined at lease inception are banned. Thus open-market, index-linked or turnover-based reviews must allow rents to drop if market levels fall.
Anti‑Avoidance Safeguards:
The Bill includes robust anti-avoidance provisions. Any clause seeking to sidestep the ban will be void. Landlords cannot delay or refuse a review to avoid a downward outcome.
Sector Impacts
Office Sector:
The traditional FRI lease model is challenged. Landlords may respond by setting higher initial fixed rents or including more landlord break rights. Developers and landlords may adjust incentives and there is likely to be more frequent use of lease re-gears and renegotiations.
Retail Sector:
The policy aims to help high streets, but many retail leases already lack reviews. 90% of new retail leases are 5 years or less. Smaller retailers may benefit, but landlords may counter with higher base rents, fixed increases, or turnover structures.
Industrial Sector: Industrial leases, often for longer terms than alternative assets, face new volatility. Landlords may use fixed steps or CPI-linked clauses. This could affect yields and slow investment in some submarkets. Some commentators have questioned why sectors such as logistics and Grade A offices have been targeted alongside high street shops.
Implications for Stakeholders
Landlords:
Lose income certainty. Many will revise lease structures and underwriting. Yields may rise and capital values may soften.
Tenants:
Gain flexibility. This could improve affordability, but landlords may increase base rents or shift to CPI/fixed increases.
Investors:
Face new rental risk. Property values may adjust and institutional demand could shift in favour of non-UK assets.
Lease Structures and Market Responses
Higher headline rents:
Landlords may set higher initial rents to offset the loss of upward-only certainty.
Stepped or fixed uplifts:
These may replace open-market clauses as they fall outside the ban.
Index-linked reviews:
Since general inflation is rarely negative, indexation offers revenue growth with limited risk of reversal. CPI uplifts offer predictability and may rise in popularity. Under the Bill, landlords could still impose caps on inflation based reviews but could not include collars.
Shorter leases and breaks:
More frequent renegotiations and flexibility are likely.
Stronger tenant triggers: Tenants must ensure their review rights are enforceable and clearly drafted.
Valuation and Investment Outlook
Rising yields:
Rental volatility increases risk, pushing up yields and reducing asset prices.
Valuation models: Must now incorporate downside scenarios and adjust discount rates.
Lender covenants: Funding structures may change as debt-service coverage is reassessed.
Investment sentiment:
May dampen, especially for long-income funds or overseas investors.
Advice & Next Steps (SHW Perspective)
Overall SHW’s Valuation team anticipates moderately higher yields on new leases and a cautious stance from investors until the dust settles.
It is important to audit a lease pipeline and complete leases ahead of the ban where possible.
Portfolios should be reviewed to stress test them where all rents are rebased to the market rental review. Model downside rent scenarios to understand exposure.
Going forward it may be necessary to renegotiate deal terms to consider either fixed rents or alternative review clauses such as stepped or CPI reviews instead of open-market.
Looking Ahead
If enacted, this would be the most significant UK leasing reforms in years. While intended to help tenants, it could disrupt investment and valuation. SHW will monitor developments closely and continue advising clients on how to navigate this evolving landscape.
SHW’s Lease Advisory and Valuation teams are preparing guidance notes and holding roundtables with clients to discuss strategy to ensure their interests are protected as and when the Bill becomes law.
For Lease Advisory enquiries please contact:
07872 375967
For Valuation enquiries please contact:
07736638931
