The UK Government has recently proposed a ban on upwards-only rent reviews in commercial leases, a move that has been described as “pro-business” and “pro-tenant.” The aim is to make commercial property leasing fairer, particularly for small and medium-sized businesses (SMEs) that may struggle with steadily rising rents locked into long-term leases.
But will this proposal really shift the dynamics of the commercial property market?
Shorter Leases Already the Norm
Since the 2008 financial crisis, there has been a clear trend away from longer leases with rent reviews. The market has shifted towards shorter leases—typically five years or less—that usually don’t include any rent review mechanisms. This is particularly true in Lancashire, where deals often involve local investors and smaller occupiers who prefer flexibility over long-term commitments.
In this context, the proposed legislation may simply not apply to a large portion of the market. Landlords could also respond by opting for even shorter lease terms to avoid the need for rent reviews altogether.
Could It Encourage Longer Leases?
One possible positive outcome is that more tenants might be encouraged to sign longer leases, knowing their rent could reduce if market conditions decline. In theory, this could offer greater security for both parties—tenants get predictability with downside protection, while landlords retain occupiers for longer.
But from an investment perspective, the uncertainty around income streams may not sit well with institutional investors. Rent reviews have traditionally provided an upward-only buffer that supports capital values—something that pension funds and other long-term investors rely on. If downward reviews become more common, it could weaken investor confidence and affect valuations.
Sector-Specific Effects
The impact of the ban will likely differ between sectors. In the industrial market—still performing strongly with rising rents—the change may have little effect. But in struggling sectors like retail, where market rents are under pressure, the ability to review rents downward could offer real relief to tenants.
Will It Happen?
We remain sceptical. While the proposal is headline-grabbing, it feels like the kind of policy that might ultimately be watered down or shelved altogether. There are many practical and legal hurdles to overcome, and it’s unclear how far the Government will actually go.
While banning upwards-only rent reviews may be positioned as a win for tenants, the true impact—especially in regions like Lancashire—is likely to be muted. The trend towards shorter leases already limits the relevance of rent reviews in many cases. However, if the legislation does allow for genuine downward rent adjustments, it could subtly shift the lease negotiation landscape—particularly in sectors under pressure.
As always, we’ll continue to keep clients informed and provide practical advice on how to structure leases in a way that balances flexibility, security, and long-term value.
For more information or to discuss how this may affect your commercial property interests, feel free to get in touch.
