Commercial Real Estate
Nickhil Mandora
July 2025
As part of the newly introduced English Devolution and Community Empowerment Bill, the UK Government has unveiled plans to outlaw Upward-Only Rent Review (UORRs) clauses in commercial leases — a move that could reshape the future of landlord-tenant dynamics.
The ban will apply to new agreements where, on the date the lease is entered into, the new rent following a rent review is not known and cannot be determined. It will not impact those leases already in place however, if implemented, any clause in a new or renewal commercial lease, whether contracted out of the 1954 Act or not, requiring the rent not to decrease will be unenforceable.
The proposal, aimed at revitalising high streets and supporting small businesses, has already been met with mixed reception across the property sector and The British Property Federation has criticised the lack of industry consultation.
What Are Upward-Only Rent Reviews?
UORRs are a common feature in commercial leases in England and Wales. UORRs allow rent to increase or remain static at review dates – typically every five years – but never decrease, even if market rents fall. This industry accepted approach to commercial leasing has long been favoured by landlords for providing income certainty and supporting property valuations.
Tenant Perspective: A Welcome Relief
For tenants, particularly small and independent businesses, the proposed ban is likely to be regarded as a positive development. UORRs have incurred criticism for binding tenants to unsustainable rent levels, especially in volatile markets. However, the outlaw of UORRs will effectively transfer the risk from tenant to landlord.
As such, a decision will need to be made by landlords as to whether to adopt a fixed rent or to permit rent variation through a rent review clause that accommodates both rises and reductions in rent throughout the term of the lease.
Landlord Perspective: A New Risk Landscape
Landlords, however, will almost certainly have concerns about the reform. Whilst rental income from commercial leases is currently considered a stable and predictable revenue stream, the prohibition of UORRs will introduce greater volatility in cashflow. Furthermore, industry stakeholders will argue that the outlaw of UORRs will undermine the perceived security of rental income and place prospective commercial property developers at a disadvantage when seeking finance.
Landlords may therefore choose to obviate the balance between risk and reward by abandoning open market review clauses and opting for the stability provided by index linked reviews.
What Happens Next?
The proposed ban on upward-only rent reviews marks a significant shift in UK commercial leasing. Whilst it aims to give tenants greater flexibility and affordability, landlords face a more complex and potentially less predictable income landscape.
In order to counteract this, it is possible that landlords will take a more aggressive stance at the outset of negotiations to mitigate the risk of stagnant or falling rents. Similarly, the inclusion of tenant-friendly terms, such as break clauses and rent-free periods, may become less prevalent as landlords reassess their leasing strategies.
Alternatively, landlords may opt for shorter leases which are to be contracted out of the Landlord and Tenant Act 1954. The potential drawback of this approach is that the cost of reletting the property will likely be passed to the tenant.
We may also see more pre-agreed stepped rents being negotiated (such increases would not be caught by the ban as the rent would be known at the outset) and this would give both tenants and landlords certainty at the start of a lease as to how much rent will be payable at any given time during the lease term.
Ultimately, the success of this legislative change will depend on how effectively the market adapts to a model that seeks to balance commercial flexibility with financial viability. As the Bill progresses through Parliament, stakeholders on both sides will need to stay alert to legislative developments and prepare for a new era in lease negotiation.
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