On 10 July 2025, the UK Government published the English Devolution and Community Empowerment Bill (“Bill”). Among its provisions is a proposal to prohibit upward only rent review (“UORR”) clauses in commercial leases – a move that has sent ripples through the real estate sector. The absence of prior consultation took many by surprise, with some questioning the legitimacy of the announcement. If enacted, the legislation would mark a significant shift in the way commercial leases are negotiated with implications for landlords, tenants, investors and funders alike.
The Proposal
The Government has criticised UORR clauses in commercial leases stating that they “pit landlords against businesses and can make rents unaffordable and cause shops to shut.” The intention behind the proposed ban is to support small businesses with a broader aim of boosting local economies and employment. In practice however, UORR clauses in commercial leases have historically been used to provide Landlords, particularly institutional investors, predictable and stable rental income, rather than to penalise tenants by way of rising rent.
The proposed restriction would not apply retrospectively to existing leases but would affect new leases and lease renewals of protected tenancies under the Landlord and Tenant Act 1954. Under the new regime, the requirement for rent not to fall below the current passing rent would be unenforceable. As a result, future rent reviews could lead to revised rents that are higher, lower, or remain in line with the existing rent, depending on market conditions at the time of the rent review. The legislation also proposes anti-avoidance provisions and would give tenants the right to initiate a review by serving notice where a landlord fails to do so.
What this means for commercial leases
We are already seeing a shift towards shorter lease terms in the commercial property market. The proposed legislative change may accelerate this trend, as landlords could become more reluctant to include rent review provisions and instead negotiate new rents at lease expiry based on open market conditions, should the tenant seek a renewal.
The legislation may also prompt landlords to negotiate higher initial rents to account for the risk of downward rent reviews in the future. At the same time, tenants may view the proposal as an opportunity to negotiate more flexible rent review mechanisms – including upward or downward rent review provisions and seek additional concessions as part of the negotiation process.
The legislative proposal does not preclude fixed or stepped increases, which could serve as an alternative rent review mechanism to UORR clauses. This approach may offer greater certainty for both landlord and tenants.
Next Steps
The proposed ban on UORR clauses signals a significant change in commercial lease structuring. While the legislation is in its early stages, its potential impact on rent forecasting and negotiation strategies should not be underestimated. It is expected that the proposal will attract extensive lobbying and commentary from stakeholders across the real estate sector as part of the full consultation.
Whether you are negotiating a new lease, planning for upcoming renewal, or simply reviewing your property portfolio, now is the time to assess how these proposals may affect your commercial interests.
Our Real Estate team at Fox Williams is closely monitoring the progress of the Bill and is well placed to advise on practical implications, risk mitigation and lease structuring strategies. Please do get in touch if you would like to discuss how these developments affect your property interests.
For a more detailed analysis of the Bill’s proposal, click here.
