For decades, the commercial property market in England and Wales has operated on a bedrock of predictable income, writes Tariq Phillips, commercial property specialist solicitor at KWW Solicitors in East Molesey.

Central to this stability was the upwards-only rent review (UORR) clause. These provisions guaranteed that a property’s rent could only climb or stay the same during a review, shielding landlords from economic downturns.

However, the legal landscape has fundamentally fractured. The English Devolution and Community Empowerment Act 2026 received Royal Assent on April 29, 2026, putting an absolute end to one-way rent reviews.

Under Schedule 37 of the Act, any review mechanism that prevents rent from falling below its current level will be deemed unenforceable.

While the ban’s full commencement is anticipated for mid-2027 or 2028, anti-avoidance backdating to March 17, 2026 means the industry is already grappling with the fallout. As the market transitions, both landlords and tenants face a radically altered risk profile.

The Landlord’s Dilemma: Valuation and income volatility

For institutional investors, pension funds, and traditional landlords, the abolition of UORRs is a systemic shock. The primary challenge is the introduction of income unpredictability.

• Valuation and Debt Servicing: Commercial property valuations are heavily tied to secure, rising cash flows. Without the safety net of an upward-only clause, banks and lenders may view commercial real estate as a higher-risk asset class. This could tighten refinancing options and alter debt-yield calculations.
• The Headlease-Sublease Mismatch: A significant structural headache involves tiered leasing. If a landlord holds a pre-ban headlease (which safely maintains an upwards-only clause) but grants a post-ban sublease, they face a dangerous financial mismatch. If the local market tanks, the sublease rent will plummet downward, but the headlease rent owed to the superior landlord will remain artificially high.
• Anti-Avoidance Scrutiny: Landlords hoping to bypass the ban via creative legal drafting are out of luck. The Act explicitly invalidates side letters, ‘top-up’ guarantees, or artificial put-options designed to replicate UORRs.

To mitigate these risks, landlords are already shifting strategies. We are seeing a swift move toward stepped rents (pre-agreed annual increases, e.g., £50,000 in year one, £60,000 in year two) or fixed percentage uplifts, both of which remain fully legal because the future rent amounts are definitively known at the lease’s inception.

The Tenant’s Triumph – with Catch-22 strings attached

For tenants across retail, logistics, hospitality, and office spaces, the ruling is a historic victory. The Government’s stated goal is to revitalise high streets and ensure business rents reflect real-time economic conditions rather than artificial historic peaks.

• Market alignment: Tenants will no longer be trapped paying premium-rate rents during deep economic contractions. If the open market dips, their overheads will finally drop in tandem.
• New trigger rights: Crucially, the 2026 Act remedies a historic imbalance by granting tenants a statutory right to trigger a rent review. Previously, only landlords could initiate reviews. This prevents a landlord from simply sitting tight on a high passing rent during a market decline.

However, tenants should brace for a tactical counter-response from property owners. Because landlords are taking on more downside risk, they will seek compensation elsewhere. Tenants should expect:

• Higher day-one asking rents
• Reduced tenant incentives, such as shorter rent-free periods or smaller capital contributions for fit-outs
• A push for shorter lease terms or increased landlord break clauses to recapture control of underpriced spaces.

Immediate next steps

The ban is a blunt instrument. It applies universally to all business tenancies falling under the Landlord and Tenant Act 1954 (including contracted-out leases), stretching from high street cafes to data centres and industrial warehouses.

Because the Act targets any lease renewal arrangement or option entered into on or after March 17, 2026, the industry cannot afford to adopt a wait-and-see approach.

For landlords, now is the time to audit property portfolios. Identify upcoming renewals and evaluate exposure to potential sublease mismatches. It may be commercially viable to accelerate renewals or re-gear protected leases ahead of the formal 2027/2028 commencement to lock in legacy structures for one final term.

As for tenants, they should be ensuring that any lease currently under negotiation properly structures rent reviews to allow downward flexibility. Be prepared to trade off traditional concessions, like lengthy rent-free periods, in exchange for the long-term protection of a true two-way market or index-linked review.

The industry is also eagerly awaiting a government consultation on ‘caps and collars’(contractual limits on how far a rent can rise or fall).

If permitted, a collar could protect landlords from catastrophic rent collapses, while a corresponding cap would shield tenants from sudden market spikes. Until those regulations are finalised, adaptability and meticulous legal vetting remain the best tools for navigating this commercial real estate revolution.

NOTE: This blog is for general information only and is not intended as formal legal guidance or advice. For specialist, bespoke advice, contact Tariq Phillips or Salv Sole in our Commercial Property department