Since our July 2025 GT Alert on the English Devolution and Community Empowerment Bill (the Bill), which unexpectedly proposed a statutory ban on upwards-only rent reviews (UORRs) in new commercial leases, there have been changes to the proposals that parties to commercial leases should be aware of.
As a reminder, the Bill was introduced to Parliament on 10 July 2025 and is now at the final stage of parliamentary consideration of amendments exchanged between the House of Commons and the House of Lords. Most recently, the House of Commons considered Lords’ amendments on 21 April 2026 (including the amendment in respect of renewals discussed in this update), and the House of Lords considered the Commons’ response on 23 April 2026. Once agreement is reached on the remaining amendments, the Bill will be ready for Royal Assent – currently anticipated in early May. Consultation and implementation are expected in 2027 (and potentially into 2028) following a transitional period.
The Bill proposes (by amending the Landlord and Tenant Act 1954) to render unenforceable any rent review provision in a new or renewal business tenancy where:
- the reviewed rent is not ascertainable at the time the lease is granted; and
- the mechanism only permits the rent to increase, or guarantees a minimum increase, such as a collar (in respect of which the ultimate position is not yet settled).
As currently drafted, this would capture traditional open-market, index-linked, and turnover-linked UORRs. Fully fixed or stepped rents and genuinely upwards/downwards reviews would remain lawful.
Amendments Affecting Lease Renewals
Recently accepted amendments to the Bill have introduced a limited but potentially significant retrospective effect, particularly in respect of renewal options in leases being granted now.
The amendment, proposed by Baroness Taylor of Stevenage as the Bill’s sponsor in the House of Lords, introduces new wording in respect of “tenancy renewal arrangements.” That term is defined deliberately widely and includes tenant call options, landlord put options, and any arrangement (whether contractual or otherwise) under which a tenant may be required to take, or may require the grant of, a further lease. The amendment expressly aims to capture renewal mechanics regardless of form, including arrangements embedded in a lease or documented separately, with the stated intention of preventing avoidance through structuring.
If enacted in its current form, the amendment provides that the ban on UORRs applies not only to rent reviews within a lease, but also to the initial rent payable under a new lease granted pursuant to a renewal option where that renewal option is contained in a lease entered into on or after 17 March 2026.
This means that renewal options being agreed now could potentially be caught, even though the Bill has not yet come into force. The day-one rent under the renewal lease could not exceed the amount produced by the agreed rent-setting formula, even if that amount is lower than the passing rent at the expiry of the initial lease. Any upwards-only rent reviews within the renewal lease itself would be void.
By way of illustration, a lease expiring at a passing rent of £120,000 per annum might be renewed pursuant to a pre‑agreed option providing for the rent to be set at day-one by reference to an open-market value review mechanism. If the market rent calculated by that day-one review is £100,000 per annum, the initial rent under the renewal lease could not exceed that figure. That day-one rent would be subject to the upwards‑only rent review ban, and any future reviews within the renewal lease would need to be capable of moving both upwards and downwards. The practical effect is that a landlord could be required to accept an immediate reduction in headline rent and would lose upwards‑only protection for the remainder of the renewal term.
The precise legislative wording has not yet been settled, and it is not yet clear how any anti-avoidance provisions will apply. For example, it remains uncertain whether a last-day UORR under the initial lease would circumvent this issue in respect of renewals entered into now.
If the amendment is enacted as proposed, a landlord could find that the rent under a contractual renewal lease is lower than the passing rent under the initial lease, giving tenants one of the practical benefits associated with a statutory renewal under the 1954 Act, without the cost and procedural requirements of the statutory process.
Industry Reaction and Emerging Concerns
The property industry has reacted strongly to the proposed amendment, not least because it was introduced without prior consultation.
Some landlords and their advisers are proceeding on the basis that the amendment will survive the legislative process and are drafting accordingly. The proposed amendment is already influencing how leases are being structured, even before the Bill has completed its passage. Examples include:
- renewal options are increasingly being omitted, particularly from shorter-term leases, so that landlords retain control of rental negotiations at expiry;
- where options remain, landlords are seeking fully ascertainable stepped rents on renewal, which carries risk for both parties given long-term uncertainty in the rental market;
- some landlords seeking longer initial terms or contracted-out leases as an alternative to renewable short terms, again with the aim of retaining control over future rental negotiations; and/or
- there is increased focus on break options and subletting controls as risk management tools.
Potential Mitigation Strategies
Mitigation approaches currently being discussed in the market include:
- fixing renewal rents at the outset, even where this may be commercially sub-optimal given the long-term nature of the commitment;
- replacing renewal options with conditional agreements to negotiate, albeit with inherent limitations as to enforceability;
- using stepped rents throughout a longer initial term to reduce reliance on renewal mechanics; and/or
- re-examining valuation assumptions and lender reporting for assets with post-17 March 2026 renewal options, to reflect the potential for a downward rental adjustment on renewal.
None of these approaches provides a complete solution, and each involves commercial trade-offs.
Outstanding Issues and Areas of Uncertainty
Several points remain unsettled, and the ultimate impact and scope of the reforms will depend on the final legislative drafting, and, in all likelihood, secondary legislation and judicial interpretation. Areas of uncertainty include:
- whether limited caps or collars will be permitted in respect of renewal rents;
- how the regime will interact with statutory renewals under the 1954 Act once in force;
- the scope and application of any anti-avoidance wording; and
- the extent to which courts will adopt a purposive approach to “arrangements” designed to replicate renewal rights.
Conclusion
While the core proposal to ban upwards-only rent reviews in new commercial leases has been anticipated since mid-2025, the recent March 2026 Lords’ amendment materially changes the profile of renewal options being agreed now. The result is a narrow but significant form of retrospective effect that affects assumptions previously made about long-term rent protection on renewal.
Parties negotiating leases after 17 March 2026 should consider carefully whether to include renewal options and, if so, how renewal rents would be structured under the current proposals. Further amendments to the Bill remain possible.
