The government has indicated that there will be some flexibility on the terms of rent review clauses despite the ban on upwards only rent review clauses contained in the English Devolution and Community Empowerment Bill.
The Bill has passed through all its major stages and now is subject to a game of parliamentary ping-pong as the House of Commons and House of Lords resolve their differences in relation amendments made to the Bill in the House of Lords. However, none of the points still at issue relate to rent reviews, so we know the final form of the legislation implementing the ban, subject to a promised consultation on a collar and cap on the amount by which rents could fall or rise on review.
Published: 24 April 2026
Authors: Michael Callaghan
Implementation date
We do not know when the provisions in the new legislation will come into force. It is not likely to be before 2027 and there have been rumours that it could be as late as 2028, albeit note should be taken of the proposed retrospective aspects of the legislation, which we comment on below.
How will the ban work?
The ban operates where the rent under the lease is expressed to be payable at the higher of the existing rent and a “reference amount”. A reference amount is an amount that is arrived at by a means of calculation and so it could be one or more of an open market rent, an indexed rent or a turnover rent. Under the ban, if the reference amount is lower than the existing rent, the rent is reviewed to the reference amount. However, how does the Bill operate where there are two or more reference amounts? There has been uncertainty over this point. The Ministry of Housing, Communities and Local Government (MHCLG) has provided some much-needed clarity and will be issuing formal guidance when the Bill becomes law.
For example, if an existing rent of £100,000 is to be reviewed to the higher of the open market rent and the existing rent as increased by RPI, what happens if, on review, the open market rent is £98,000 pa and the existing rent increased by RPI is £105,000? Both figures are reference amounts. Which figure becomes the new rent payable by the tenant? MHCLG says that the higher of the two figures can be used as the new rent, since the RPI-based increase is a legitimate rental increase based on the lease terms. This is welcome news.
Landlords with turnover rent leases will benefit most from this guidance. In many cases, the tenant pays a base rent each year that increases by reference to the higher of an index-linked increase and a percentage of the previous year’s turnover. A disastrous trading year by the tenant will not see the base rent for the next year nosedive if the index-linked calculation produces a higher figure.
Consultation on a collar
The government has said that before the ban is implemented it will consult on introducing a collar on the amount by which the rent could fall because of the ban. For example, if the current rent is £100,000 it may be possible for the parties to agree that the rent could not fall by more than, say, 5%. With such a collar, if the open market rent was £91,000 on review, the collar of 5% would mean that the reviewed rent would be £95,000. The government has indicated that if a collar is agreed, it may require a corresponding cap on any increase so that, in the above example, the reviewed rent could never be more than £105,000. Tenants will no doubt welcome this latter proposal.
Retrospective effect
One amendment made in the House of Lords makes the ban operate retrospectively, but only where the landlord and tenant have, on or after 17 March 2026, entered into arrangements for the renewal of an existing lease and the renewal lease is granted on or after the ban comes into force. “Arrangements for the renewal of an existing lease” include agreements for lease, options to renew (whether contained in a lease or in another document) and landlord’s put options. Where these provisions apply, the starting rent on the grant of the renewal lease cannot be calculated on an upwards only basis and any rent review in the renewal lease cannot operate on an upwards only basis.
Comment
Development
Partner and co-Head of Development James Needham comments “when negotiating pre-lets, developers have to anticipate what an investor will be looking for when the asset comes to market for sale/funding. Until the investment market has reached a consensus on this, developers will need to judge what is likely to be acceptable, but the MHCLG guidance is helpful in confirming that a legitimate increase in one reference amount is not undermined by a fall in others. For now, we are likely to see the continuation of an existing trend – the decline of open market reviews in favour of the greater simplicity and certainty offered by indexation and fixed percentage increases.”
Investment
Partner and co-head of Investment, Kate McCall says “The MHCLG guidance is likely to be cautiously welcomed by investors as a pragmatic softening of the intended ban on upwards only rent reviews. It signals that policymakers recognise the importance of allowing leases to continue delivering rental growth through legitimate index linked or turnover based mechanisms, even where open market rents fall. While material uncertainty remains around collars, caps and the timing of implementation, the guidance suggests a clear awareness of one of the investment market’s principal concerns: preserving income certainty. In practice, this is likely to further accelerate the shift away from open market reviews towards indexation and fixed uplifts, which sit more comfortably with current pricing, funding and valuation discipline”
Corporate occupier
Partner in Real Estate Litigation , Elinor Sandbach comments “The proposed ban on upwards only rent reviews is a positive step for occupiers, offering the prospect of rents that better reflect market conditions rather than being locked into perpetual upward movement. That said, tenants should be cautious about assuming a dramatic shift in balance. Index linked and turnover based mechanisms may still protect landlords from downside risk, and potential rent review collars could further blunt the practical impact of the ban. Ultimately, while the direction of travel favours tenants, the real benefit will depend on careful lease structuring and early strategic advice to ensure the legislation delivers meaningful flexibility in practice.”