The proposed ban on upwards-only rent reviews is set to become one of the biggest structural shifts the commercial property market has seen in decades, and for many across the industry, the move has arrived somewhat unexpectedly and feels notably rushed.

Whilst the government’s aim is to create a fairer leasing landscape and support economic recovery, there is growing concern that landlords, investors and lenders have had very limited time to prepare for what could become a major re-pricing of lease risk across the market. Further, have the potential consequences been fully considered, including the potential impact on government revenue from business rates?

Offices. Logistics. Industrial. Hospitality. Data centres.

Every part of the market will feel it.

Importantly, the legislation applies to most new qualifying commercial leases, whilst existing leases remain unaffected.

Implementation is widely expected from 2027 onwards, although further consultation around caps and collars is still anticipated.

So what does it actually mean for landlords and occupiers?

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For Occupiers

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At face value, many tenants will welcome the changes.

For years, upwards-only reviews meant some occupiers continued paying rents above true market levels during weaker markets.

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Potential advantages for occupiers

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• Reduced exposure to paying above market rental levels
• Lease terms more reflective of real-time market conditions, with greater negotiating leverage at review
• Greater balance of risk between landlord and tenant

However, the picture is more nuanced than it first appears.

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Potential challenges for occupiers

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Landlords are unlikely to simply absorb the additional risk.

We may start to see:

• Shorter lease lengths
• Higher initial rents
• Reduced rent-free periods
• More frequent reviews
• Higher fixed uplifts
• Stronger covenant requirements
• Less flexibility around subletting and alienation

For occupiers making significant investment into fit-outs or long-term occupation, that could create additional pressure elsewhere within the lease structure, particularly where shorter lease lengths make it more challenging to amortise fit-out costs over the term.

There is also growing concern around subletting structures where rental levels between superior leases and future subleases could become misaligned.

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"Whilst the proposed changes may create greater flexibility for some occupiers, there is a real possibility the market simply re-prices risk elsewhere within lease structures." – Will Scott, Real Estate Partner, Irwin Mitchell‍

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‍For Landlords & Investors

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This is where the market could see the greatest adjustment.

Upwards-only reviews have historically underpinned:

• Predictable income growth
• Investment valuations
• Financing structures
• Long-term income security

Removing that certainty introduces a new level of volatility.

Perhaps most significantly, many investors feel this policy direction has emerged relatively suddenly, with insufficient clarity around implementation, transitional arrangements and the potential knock-on effect to valuations and lending markets.

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Potential advantages for landlords

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• Opportunity to modernise lease structures
• More dynamic asset management strategies
• Greater focus on occupier relationships and asset quality
• Increased flexibility around alternative review structures
• Potential differentiation between prime and secondary assets

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Potential challenges for landlords

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• Less predictable income streams
• Increased valuation sensitivity
• Potential lender caution
• Greater leasing complexity
• Potential upward pressure on financing costs
• Increased asset management requirements
• Potential slowdown in investment and development activity

There is also growing market concern around the potential retrospective impact on certain tenancy renewal arrangements, including some put and call options agreed after 17 March 2026.

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"The strongest assets will still attract demand, but landlords and occupiers alike will need to become far more strategic in how lease risk is structured and negotiated moving forward." – David Burlinson, Director, Metrus

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The Bigger Picture

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Whilst the headlines may position this as “good for tenants” and “bad for landlords”, the reality is far more balanced.

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The market is likely to recalibrate rather than radically reset. Strong assets, strong occupiers and well-structured leases will still outperform. The difference is that both landlords and occupiers may now need to think more strategically about how risk is shared within future lease structures.

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The government is expected to undertake consultation before the ban is implemented and therefore some of the details are, as yet, unknown.

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One area the market will be watching closely is which rent review mechanisms will remain permissible. Many expect landlords to increasingly favour either fixed or stepped rental increases, or rent reviews linked to inflation indices such as CPI or RPI, as alternatives to traditional open market reviews.

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However, this raises an interesting question. If rents become linked to broader economic indicators rather than underlying property market performance, does this simply shift the risk rather than remove it? For example, if occupational markets weaken but inflation remains elevated, rents could continue to rise through indexation even where market rental values are falling. Some may argue that this risks recreating, in a different form, the very issue the legislation is seeking to address.

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There may also be debate around whether broad inflation measures such as CPI and RPI are the most appropriate benchmarks for commercial property rents, or whether more sector-specific indices could provide a better reflection of market conditions.

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Another point likely to attract attention is who can trigger a rent review. Historically, some rent review provisions have only been capable of being initiated by landlords. Under a system where rents can move both upwards and downwards, tenants may seek equivalent rights to trigger a review where passing rents have moved materially above prevailing market levels.

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Landlords will also be keen to know whether rent reviews to the higher of two bases, for example an index-linked rent and an open market rent, both of which could move downwards, will be permitted following the ban, thereby helping to minimise downside risk.

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What is clear, however, is that many across the industry feel the speed and direction of the proposed reforms have caught parts of the market off guard, particularly investors and landlords who have underwritten long-term strategies around income certainty for decades.

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As the market adapts to a new era of lease drafting, negotiation and underwriting, the strongest relationships and best-quality real estate are still likely to win.

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And a further question arises: how might this impact rateable values and, ultimately, government revenue from business rates if rents become more exposed to downward movement? Had this legislation been in force during the pandemic, or during periods of significant economic recession, the implications for rental values, investment performance and public finances could have been considerable!

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If you'd like to discuss how the proposed changes could affect your portfolio, lease strategy or occupational requirements, get in touch with the Metrus and Irwin Mitchell team for an informed and practical perspective.

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David Burlinson, Director, Capital Markets & Lease Advisory, Metrus: 020 7079 3992 / David.Burlinson@metrus.co.uk

Will Scott, Partner, Irwin Mitchell: 0207 4008770 / Will.Scott@irwinmitchell.com

Sarah Swann, Partner, Real Estate Transactions, Irwin Mitchell: 07795971343 / Sarah.Swann@irwinmitchell.com  

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