The UK government has announced plans to ban upward-only rent review clauses in new commercial property leases across England and Wales, in a move that could reshape long-standing leasing practices and impact both landlords and tenants in the commercial sector.
The change is included in the English Devolution and Community Empowerment Bill, published on Thursday, and would prohibit clauses in commercial leases that prevent rents from being reduced when a lease is reviewed or renewed.
While the reform will not apply to existing contracts, it will apply to all new leases.
Under the proposal, landlords entering new agreements must choose either fixed rents or review clauses that allow for both increases and decreases in rent based on market conditions.
The government argues the change will make commercial rents more affordable, particularly for small businesses, and help address the growing issue of vacant high street properties.
The policy, which was not included in Labour’s 2024 election manifesto, was a surprise by many in the property industry, according to the Financial Times.
Though upward-only rent reviews were previously criticised by Labour as far back as their 2001 manifesto, successive governments had stopped short of legislative change—until now.
Supporters say the measure could relieve cost pressures for small business tenants.
“A typical small firm in premises has faced rising rents and rates among all the other costs like national insurance contributions, so this change should bring some relief,” said Craig Beaumont, executive director at the Federation of Small Businesses.
However, the property industry has expressed serious concerns about the lack of consultation and potential unintended consequences.
Melanie Leech, chief executive of the British Property Federation, said: “Interference in long-established commercial leasing arrangements without any prior consultation or warning has no place in the Devolution Bill.”
She added that the government risked becoming “mired in detailed market issues” rather than focusing on enabling local partnerships to drive economic growth and revitalise town centres.
The government sees the reform as part of a broader effort to support local economies and small businesses.
Last year, it introduced “high street rental auction” powers that allow councils to lease out long-vacant properties.
The new rent review changes are intended to build on that by reducing entry barriers for smaller occupiers.
If passed, the ban will mark a significant shift in how commercial leases are structured in the UK, and could lead to a reassessment of investment models, asset valuations, and lease negotiations across the retail and office sectors.
