These proposals form part of the English Devolution and Community Empowerment Bill and could signal a significant shift in how rent reviews will operate going forward. A Second Reading of the Bill will take place tomorrow, 2 September 2025, at which point we expect further detail and clarity on the reforms. In the meantime, we have prepared this guidance note for both landlord and tenant clients, setting out the information available at this early stage.
What is Being Proposed?
The UK Government has proposed a ban on upwards-only rent review clauses in commercial leases in England. The proposals are set out within Schedule 31 of the English Devolution and Community Empowerment Bill and would be implemented via a new Schedule 7A to the Landlord and Tenant Act 1954, applying to leases where tenants occupy for business purposes. Crucially, the proposal is not retrospective, so existing leases with an upwards-only rent review clause will remain valid until expiry.
Why is it Being Put Forward?
The Government argues that UORRs create a one sided dynamic which forces tenants to absorb rental increases in markets where rents have increased, whilst Landlords face no equivalent downside risk. They have claimed that UORRs contribute to unaffordable rents and vacant high streets. The proposals appear to be driven largely by pressures in the high street retail sector, however the reforms would apply to all sectors.
The proposals form part of a broader strategy to revitalise town centres, stimulate economic activity and support SMEs, aimed at supporting tenant flexibility and affordability, by supporting tenant flexibility and affordability, particularly in high street retail.
How has the industry reacted?
The proposals were announced by the government with no prior consultation with the industry. Landlords and advisors have, unsurprisingly, been taken aback by this sudden development.
The British Property Federation (BPF) is actively consulting with members to collect views and data on potential impacts. BPF - BPF Spotlight: The Latest on Upward Only Rent Reviews. Likely impacts being raised include:
- Investment appetite and valuations – Higher perceived risks placed upon Landlords may dampen investor interest. Potential investors, both at home and overseas, may be more likely to consider alternative assets outside of the sector, or outside the UK altogether, as a result. If this is the case, it is also likely to have a knock-on effect on the valuations of commercial real estate assets, and as a result this will impact institutional Landlords, including pension funds.
- Financing – Debt finance relies on predictable rental income. By introducing a ban on UORRs for new leases, the cost of borrowing may increase and the availability of debt finance may even reduce.
- Development viability – By introducing additional uncertainty when it comes to future income streams for developers, the viability of new commercial schemes is likely to reduce.
When Will the proposals be adopted?
The second reading of the Bill is scheduled for 2nd September 2025, but there is no firm timeline for implementation. The accompanying impact assessment released by the Government refers to implementation being scheduled for 2027 or 2028.
It is worth highlighting that the changes will have no effect on existing leases, or those agreed before implementation of new legislation. Therefore, longer-term effects are likely to unfold over a period of some five years following the changes becoming law.
Bidwells Data – How Have Leases Shortened Over Time?
Bidwells’ internal data shows a reduction in the average lease length agreed over recent years: for example, average lease terms have reduced from 10–15 years to around 5–7 years in many sectors. We expect this trend to accelerate following this legislation being implemented due to reduced landlord certainty and greater demand for flexibility from tenants.
What can we expect based on comparable legislation elsewhere?
Ireland banned upwards-only rent reviews in 2010 for new leases under the Land and Conveyancing Law Reform Act 2009. This resulted in initial short term volatility, however the ban did not have a significant impact over the longer term and commercial investment has stabilised, however the direct impact of this legislation is difficult to assess alongside other factors (e.g. Brexit)
Is Indexation the answer?
The draft legislation still allows for rent reviews to be based on a specified Index - such as the Retail Prices Index (RPI) or the Consumer Prices Index (CPI) - provided the rent review mechanism is not upward-only. This practice has already been adopted by many Landlords as a method for reviewing rents, instead of the Open Market Rent, and is particularly helpful in locations where the commercial real estate market is perceived to be weaker, as the future rent is tied to increases in inflation instead of local performance. In these markets it may also be common practice to agree a ‘cap’ on the reviewed rent to provide protection to the Tenant during times when index inflation is extreme, and a ‘collar’ to guarantee an increase in rent to the Landlord if index inflation is particularly low or negative. However, under the proposed legislation, the ability to include a collar will be removed. In the Oxford-Cambridge Arc the practice of Index-linked rent reviews is less common, as the local economy is deemed to be strong enough to outperform the wider national picture.
A hybrid model, where the rent is agreed to the higher of the Index calculation or the Open Market Rent (OMR) would still be permitted under the new legislation. This approach could offer Landlords’ income some protection via the Index, whilst also allowing the rental income to be reviewed to the OMR where rents have increased above inflation.
Lease Length Trends
MSCI reports that new leases in 2024 H2 had an average length of 8.4 years (income-weighted, ignoring breaks) or 6.7 years including breaks. Longer-term data shows average weighted leases were 14 years in 2002. This clear trend of shortening leases is expected to continue and possibly accelerate under the proposed reforms.
Conclusion
The proposed ban on UORRs is in its early legislative stages and the precise details are still forthcoming. At this stage, no action is required by Landlords or Tenants, nor their advisors. Until the legislation is finalised, UORRs are still permitted in existing and new leases.
However, Landlords and Tenants should stay informed on updates from the Government and we are monitoring developments closely. For advice on how this legislation may impact your property or portfolio, please contact Bidwells’ Lease Consultancy Team. We will continue to track progress on this legislation and keep you informed.
Caveat
This document is intended to provide general commentary on current proposals. It does not constitute specific advice. The analysis is based on our understanding of the draft legislation and market data as at August 2025 and should not be relied upon for decision-making without further professional guidance.
