The English Devolution and Community Empowerment Bill
In July 2025 the English Devolution and Community Empowerment Bill was introduced and caused much debate in the property market due to its inclusion of a proposed ban on upwards-only rent reviews.
Why is the ban being proposed?
The government claims that upwards-only rent reviews artificially inflate rents during economic downturns, and are squeezing tenants unfairly, driving up consumer prices and contributing to unsustainable rent levels, vacant premises, and the decline of town centre retail.
What is being proposed?
The relevant provisions of the bill, if enacted, will be inserted into the Landlord and Tenant Act 1954 (“1954 Act”) and will prohibit upwards-only rent reviews (so rents can increase and decrease) in new and renewal leases granted within the security of tenure provisions of the 1954 Act, in relation to commercial premises in England and Wales.
What will the market impact be?
Landlords and investors will be concerned about income volatility, valuation uncertainty and reduced returns.
Tenants will welcome the potential for fairer rent adjustments, especially in tougher trading conditions and will have the legislative protection with rents being capable of decreasing in line with the open market or indexation.
We could see:
- capital value uncertainty: due to the reduced predictability of asset rental income;
- risk of conflict with any headlease: whilst newer underleases might not contain upwards-only rent reviews due to the ban, older headleases may still contain upwards-only rent reviews, which could create an income disparity for investors;
- structuring of leases in the future: a potential market shift to a greater reliance by landlords on index linked rent reviews, shorter term leases or fixed rental increases; and
- a risk of more litigation: disputes may increase (certainly initially) in relation to the interpretation of drafting.
Is the ban retrospective?
The ban is not retrospective and will only apply to new and renewal leases entered into after the proposed legislation comes into force.
Two tier market
The introduction could lead to an initial two-tier market – older leases with upwards-only rent reviews vs. newer leases without them – that could impact availability of rent comparison evidence and investment strategy.
The current market view is that from past experiences of similar legalisation in other jurisdictions, a two tier market may be avoided, but only time will tell.
What rent review types does the ban affect:
Any mechanism where the rent can only increase.
Anti-avoidance provisions
The bill includes broad anti-avoidance measures to prevent landlords from using creative drafting to sidestep the ban.
For example, parties cannot:
- circumvent the rent review provisions in a lease by documenting an upwards only review in a side letter;
- agree put options in leases requiring tenants to take a new lease at the higher of the passing rent and the open market rent; and
- include provisions stipulating that the rent cannot fall by more than a fixed percentage.
The new regime will also ensure that tenants have the protection of triggering rent reviews even if landlords fail to do so.
Future gazing
The market rarely sees a fall in inflation and so it is expected that landlords may just switch to index linked rent reviews and ensure they do not fall foul of the anti-avoidance measures in the legislation.
Whilst there is no set date on when the bill will receive royal assent, it is anticipated that the bill will become law later this year or in early 2026. However, the bill is subject to amendment which is certainly possible following the public committee and consultation stage, and so the market will monitor the bill’s progress with great interest.
If you need advice structuring and documenting your lease whether new or in relation to an upcoming renewal please contact Nick Dalgleish for assistance.
