Upward only rent review clauses have long been a cornerstone of commercial leases in England and Wales. These clauses allow landlords to increase rent at review points based on market conditions, but prevent rents from decreasing even when the market softens. While historically attractive to landlords for securing predictable income, these clauses have been increasingly criticised as unfair to tenants, particularly during market downturns.
The government has proposed banning upward only rent review clauses from 2026, a move that will fundamentally reshape lease negotiations, rent review strategy, and portfolio management. For landlords, tenants, and investors, understanding the implications of the proposed ban is essential to future-proofing agreements and avoiding unintended financial exposure.
This article explores the nature of upward only rent reviews, the proposed reforms, and the practical steps both landlords and tenants should consider before the 2026 implementation.
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What Are Upward Only Rent Reviews?
An upward only rent review clause allows a landlord to increase the rent at predetermined review dates in line with market rent or a formula agreed in the lease, but prevents any decrease if market conditions push comparable rents lower. Typically, these clauses are found in commercial leases across retail, office, and industrial sectors.
The rationale for landlords is straightforward: protection against market volatility and long-term rental income certainty. For tenants, however, these clauses can create financial strain during economic downturns, as they may be required to pay rents above the prevailing market rate.
The Proposed 2026 Ban
The government’s proposed ban on upward only rent review clauses forms part of a broader commercial lease reform agenda aimed at improving fairness and transparency in the private rented sector. Key elements of the proposed reforms include:
- Elimination of upward only clauses – New commercial leases, and potentially existing leases upon renewal, will no longer permit rent to increase without downward adjustment if market conditions dictate.
- Market-based rent reviews – Rent will be adjusted to reflect prevailing market rates, allowing reductions where appropriate.
- Transitional arrangements – Existing leases may be grandfathered in some cases, but new agreements from 2026 will need to comply.
- Tenant protection measures – Enhanced clarity in lease drafting and dispute resolution mechanisms to ensure fair market outcomes.
These reforms are intended to balance the interests of landlords and tenants, but they will require careful lease drafting and portfolio management to avoid unintended consequences.
Impact on Landlords
The proposed ban will have significant implications for landlords’ revenue certainty and financial planning:
- Reduced Income Security
- Landlords will no longer have guaranteed rent protection if market rents fall.
- Income streams in economic downturns may be lower than previously anticipated, particularly in sectors such as retail or hospitality.
- Increased Risk in Lease Negotiations
- Tenants may push for lower starting rents or more flexible terms, knowing that downward adjustments are now permissible.
- Lease agreements will need careful drafting to reflect both parties’ intentions and limit disputes over market rent valuations.
- Portfolio Valuation Impact
- Valuations based on projected rental income may be affected by the potential for rent reductions at review points.
- Investors and lenders may require reassessment of risk, particularly for long-term leases with substantial upward only clauses currently embedded.
- Strategic Planning Challenges
- Landlords will need to review upcoming rent reviews, lease renewals, and investment strategies to align with the new legal framework.
- Consideration of lease restructuring, service charge arrangements, and alternative income protections will become more important.
Impact on Tenants
The ban offers several advantages for tenants:
- Protection Against Overpayment
- Tenants will no longer be locked into paying rent above the market rate during downturns.
- Flexibility in rent review outcomes can improve cash flow and financial planning.
- Enhanced Negotiating Power
- Tenants can negotiate more balanced lease terms, including review mechanisms and caps on rent increases.
- The removal of upward only clauses strengthens tenants’ position in sectors experiencing market volatility.
- Alignment With Operational Costs
- Market-based reviews ensure that rent adjustments better reflect the property’s actual value and operational performance.
- This may support business sustainability and reduce the risk of insolvency in economic downturns.
Practical Considerations Before 2026
Both landlords and tenants should prepare proactively to manage the impact of the proposed reforms:
- Lease Audit
- Identify leases containing upward only clauses and determine which will be affected by the 2026 ban.
- Assess the potential financial impact of rent reductions in a market downturn.
- Review Rent Review Clauses
- Consider drafting alternative mechanisms for rent adjustment that comply with the proposed rules.
- Include clear market rent definitions, review intervals, and dispute resolution provisions.
- Plan Portfolio Strategy
- Landlords should evaluate which properties are most exposed to market volatility.
- Consider diversification, restructuring leases, or implementing alternative income protection measures.
- Engage Professional Advice
- Legal guidance is essential to navigate the new framework, mitigate risk, and ensure lease compliance.
- Valuers and property advisors can provide market rent assessments to inform negotiations and planning.
- Communicate With Tenants
- Early engagement with tenants can reduce disputes and ensure smooth lease transitions.
- Transparency in explaining review mechanisms and market assumptions builds trust and reduces conflict risk.
Potential Challenges and Disputes
Even with the ban in place, rent review disputes may arise:
- Valuation disagreements – Determining the “market rent” can be subjective and open to interpretation.
- Economic volatility – Rapid changes in property market conditions may lead to disagreements over timing and extent of rent adjustments.
- Transitional issues – Existing leases with upward only clauses may require renegotiation, particularly at lease renewal or assignment.
- Lease drafting inconsistencies – Ambiguities in existing clauses could create uncertainty over how the new rules apply.
Proactive legal planning and clear lease drafting can mitigate these risks.
Conclusion
The proposed ban on upward only rent review clauses from 2026 represents a major shift in commercial property law in England and Wales. Landlords will face increased risk of rent reductions during downturns, while tenants gain greater protection against overpayment and market volatility.
Proactive preparation is essential. Lease audits, clause reviews, and strategic planning can mitigate financial exposure and ensure compliance with the new framework. Professional legal guidance is crucial to navigate the complex intersection of lease obligations, market rent assessment, and regulatory reform.
By acting now, landlords and tenants can protect their interests, avoid disputes, and adapt to the changing landscape of commercial rent reviews in a post-2026 world.
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Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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