Major reform ahead for commercial leases - Proposed ban on upwards only rent reviews in new leases

The proposed Bill includes a provision to “ban” upwards-only rent review clauses in new commercial leases and lease renewals in England and Wales.

These provisions will not be applied retrospectively to existing leases. This long-anticipated reform aims to create a more balanced, market-reflective approach to rent reviews.

Under the new system, rents could decrease as well as increase at review points, aligning more closely with current market conditions.

Good news for tenants, especially SMEs, who often struggle with above-market rents.

A shift towards fairer leasing terms and more sustainable commercial tenancies.

But some landlords and investors are raising concerns about reduced income predictability and asset valuations.

These provisions could also lead to shorter leases to avoid rent reviews altogether.

This could be one of the most significant changes to commercial leasing in decades. The Bill will need to make its way through the parliamentary process, which might be expected to take 6 to 12 months. There will be considerable lobbying in that time, and the Bill may be amended during the process.

What are your thoughts? Could this bring a fairer balance between landlord and tenant?

For further information on commercial leases, please contact Yildiz on 020 8461 6214