On 10 July 2025, the government introduced a major reform to commercial leases across England and Wales, proposing a ban on upward-only rent reviews (UORRs) for new leases and lease renewals under the Landlord and Tenant Act 1954. This significant shift aims to tackle unaffordable rents, revitalise struggling high streets, and help small businesses.
At Kemsley LLP, we’re actively advising our clients – landlords, tenants, investors, and lenders – to understand exactly what this change could mean and how best to respond.
What Exactly Is Changing?
Under the proposed English Devolution and Community Empowerment Bill:
- Upward-only rent reviews (clauses that prevent rents from falling) will become unenforceable in new commercial leases and protected lease renewals.
- Landlords must choose between:
- Fixed rents for the lease duration, or
- Rent reviews allowing rents to rise or fall in line with market conditions.
Crucially, existing leases remain unaffected until renewal.
Why Is The Government Doing This?
The government argues UORRs unfairly pit landlords against tenants, driving rents above market levels and contributing to vacancies on struggling high streets.
“Upward-only rent reviews pit landlords against businesses, making rents unaffordable and forcing shops to shut. This reform helps keep small businesses running, boosts local economies, and tackles high-street vacancies.”
— UK Government, July 2025
The Federation of Small Businesses strongly supports this move:
“Small firms face rising rents, rates, and national insurance costs, so this change brings real relief to businesses negotiating their next lease.”
— Craig Beaumont, Executive Director, Federation of Small Businesses
However, industry bodies, such as the British Property Federation, caution about unintended consequences:
“Interference in long-established leasing arrangements without consultation risks investor confidence and economic growth at a sensitive moment.”
— Melanie Leech, CEO, British Property Federation
What Does This Mean For Occupiers?
Will occupiers genuinely see lower rents?
Yes, potentially. Occupiers – especially SMEs and retail businesses – could benefit significantly from rents that align more closely with local market realities.
What should occupiers watch out for?
Landlords may still push for index-linked rents (e.g., CPI or RPI). In regeneration or growth locations (similar to Camden or Shoreditch historically), these indexed rents might rise slower than open-market rents, providing an advantage. Conversely, during inflationary periods, indexed reviews could outpace market rents.
“Occupiers should pay close attention to lease terms – particularly market-rent clauses – to ensure their rent reviews accurately reflect local market conditions.”
— Tom Kinloch, Director (Management)
What Does This Mean For Landlords?
Will landlords lose income security?
In some cases, yes. UORRs historically provided predictable, inflation-protected income, underpinning investment values – particularly for institutional landlords.
However, landlords have strategies available:
- Shorter lease terms, stepped rents, and turnover-linked rents to mitigate risks.
- Tightening lease terms around break options, incentives, and dilapidations to preserve asset value.
There is also an opportunity for proactive portfolio management, as investors can capitalise on mispriced secondary assets by adopting CPI-linked or turnover-based rents to secure resilient incomes, improve occupancy stability, and enhance tenant retention through leases closely aligned with market conditions.
“Institutional landlords have already moved towards CPI-linked and stepped-rent leases in recent years. However, landlords must now be even more strategic in lease structuring to preserve value without upward-only protection.”
— Colin Herman MRICS, Managing Director (Commercial Agency)
What Does This Mean For Investors And Lenders?
Investor confidence could initially be unsettled – particularly in secondary property sectors historically reliant on UORRs to underpin valuations. However, prime industrial and logistics markets, with strong occupier fundamentals, remain robust.
Investors and lenders should carefully re-assess valuation assumptions in light of lease flexibility and risk profiles.
“We anticipate greater caution in valuing secondary properties where rental growth assumptions were previously underpinned by UORRs. Prime assets will remain attractive – but investors should anticipate deeper scrutiny of lease terms.”
— Chris Tidder MRICS, Director (Valuation, Landlord & Tenant)
Sector-by-Sector Impact
- Industrial & Logistics: Limited disruption. Leases often already incorporate CPI/RPI-linked reviews, with strong occupier demand stabilising rental values.
- Retail & Secondary Offices: Potentially significant disruption. These sectors already face structural occupancy challenges, making rents more volatile and potentially subject to downward pressure at review.
“We’re seeing increasing use of turnover rents, stepped increases, and CPI caps/collars. Rather than hindering landlords, these lease structures can actively improve occupancy by aligning landlord and tenant interests more closely.”
— Ben Collins MRICS, Director (Commercial Agency)
Unintended Consequences And Wider Market Effects
There are genuine concerns around unintended outcomes:
- Increased arbitration or independent expert referrals due to ambiguity around market rent definitions.
- Secondary market assets – those already less attractive or in weaker locations could face valuation pressures as investors and lenders factor in higher income volatility.
“Development viability – especially speculative schemes in marginal locations – could be a concern if rental growth assumptions become less predictable. It’s essential investors and developers approach these sectors cautiously, considering lease structures carefully when appraising an opportunity.”
— Mike Lawrence MRICS, Director (Development)
Practical Next Steps
Kemsley LLP can support you through this transitional period. Our experts can advise on:
Landlords
- Lease structuring & rental strategies
- Disposal/acquisition
- Lease negotiation
Occupiers
- Rent review & lease renewal strategy
- Lease negotiation to reflect fair market terms
- Advice on rights and protection under L&T Act 1954
Investors & Lenders
- Market-aligned valuations reflecting new lease conditions
- Acquisition & disposal
- Detailed advice on lease risk profiles
Developers
- Strategic advice on development viability under new leasing rules
- Risk assessment of speculative schemes
- Land acquisition and disposal
Speak to Our Specialists
- Colin Herman – Managing Director (Commercial Agency)
- Ben Collins – Director (Commercial Agency)
- Tim Collins – Director (Commercial Agency)
- Chris Tidder – Director (Valuation, Landlord & Tenant)
- Daniel Butcher – Director (Valuation, Landlord & Tenant)
- Mike Lawrence – Director (Development)
- Tom Kinloch – Director (Management)
Contact us directly:
📞 01245 358 988
