Watch This Bill – Rent Review Changes for Commercial Properties

On 10 July 2025, the Government introduced the English Devolution and Community Empowerment Bill, which has generated significant interest and concern within the commercial property sector. A particularly notable and controversial provision within the Bill seeks to prohibit upwards-only rent reviews in commercial leases, marking a major shift in standard market practice.

While the proposal may have come as a surprise to some, it is not entirely new. A similar attempt was made in 2021 through the Commercial Rent (Prohibition of Upward-Only Reviews) Bill, introduced and presented by Liberal Democrat MP Sarah Olney. That Bill ultimately failed to progress. However, the current Bill appears to have greater momentum and may soon reshape the commercial leasing landscape.

What Are Upwards-Only Rent Reviews?

In many commercial leases, rent reviews are typically structured to favour the landlord. These clauses ensure that, regardless of fluctuations in the market, rent can only stay the same or increase – never decrease.

For example:

• A tenant enters into a lease at market rate.
• At the time of the rent review (e.g. 5 years later), the open market rent has fallen.
• Under an upwards-only clause, the rent remains at the higher, initial rate, even though the market rate is lower.

This often places a considerable financial strain on tenants who may find themselves paying above-market rent, especially during economic downturns.

What Does the Bill Propose?

While the English Devolution and Community Empowerment Bill covers a wide range of issues relating to local authorities, emergency services, and local audit, Part 5 of the Bill titled “Business Tenancies: Prohibited Terms Relating to Rent” directly impacts commercial leases.

The Bill proposes an amendment to the Landlord and Tenant Act 1954, through the insertion of a new clause:
Section 54A – “Rent Reviews and ‘Put Options’: Prohibited Terms”.

This clause introduces Schedule 7A, which outlines new rules governing rent review clauses in business tenancies. The key provisions of Schedule 7A are summarised below.

When Does Schedule 7A Apply?

Schedule 7A will apply to a tenancy if all four of the following conditions are met:

1. Business Tenancy
   The lease falls within Part II of the Landlord and Tenant Act 1954 (it is a business tenancy with security of tenure), or it would do so except for being a licensed premises under section 43(1)(d).
2. New Lease
   The lease is granted after the Schedule comes into force, and is not made under a contract entered into before that date.
3. Uncertain Rent Review Outcome
   The lease contains a rent review clause where the rent to be paid following the review cannot be determined at the time of granting the lease.
4. Indexed or Variable Rent Basis
   The reference amount (which is the term used in the bill for a potential new rent as calculated in a rent review) is determined with reference to inflation or another indexation, a hypothetical open market rent, or the tenant’s turnover AND the new passing rent (usually agreed between the Landlord and Tenant) could/will be different from the reference amount.

The Effect of the Proposed Law

If the above conditions apply, a Landlord will have to charge rent at the reference amount determined during the rent review, irrespective of whether the reference amount is lower than the previous passing rent. 

Practical Example

Initial Lease Agreement

• Tenant Z agrees to a 15-year lease with Landlord A.
• Rent reviews are to occur every 5 years.
• The initial rent is £10,000 per annum, agreed in a strong economic climate.
• The rent review is based on a hypothetical open market rent.

Five Years Later

• The economy declines.
• Open market rent drops to £9,000 per annum.

Current Law (Pre-Bill)

• Landlord A could insist on keeping rent at £10,000 despite the market downturn.

If the Bill Becomes Law

• The rent review clause (as drafted) will mean the Landlord is required to make the new passing rent the same as the reference amount determined within the rent review.
• The rent must reduce to £9,000 in line with the market.

Implications for Landlords and Tenants

This legislative change, if passed, could have significant financial implications, especially for landlords with large commercial portfolios. In periods of economic downturn, landlords would no longer be protected by upwards-only clauses and may experience a sharp drop in rental income.

For tenants, the reforms would provide greater fairness and flexibility, allowing rents to reflect actual market conditions.

Current Status of the Bill

As of September 2025, the Bill is at the Committee Stage in the House of Commons. It must still pass through the remaining Commons stages, the House of Lords, and receive Royal Assent before becoming law.

If passed, the legislation could come into force as early as 2026. Given its potential impact on both landlords and tenants, we recommend that all stakeholders begin reviewing existing and future lease agreements in anticipation of these changes.

Next Steps: How We Can Help

At SE-Solicitors, our commercial property team is closely monitoring the progress of the English Devolution and Community Empowerment Bill. We can provide:

• A review of your current lease agreements
• Advice on drafting compliant rent review clauses
• Guidance on how to future-proof your commercial property portfolio.

If you have any concerns or questions about how the proposed legislation may affect your interests, please contact our commercial property team today.

Sources

Commercial Rent (Prohibition of Upward-Only Reviews) Bill

English Devolution and Community Empowerment Bill

English Devolution and Community Empowerment Bill – Parliamentary Bills – UK Parliament

Landlord and Tenant Act 1954