The English Devolution and Community Empowerment Bill (“the Bill”) was submitted to Parliament on 10th July 2025. While the Bill is largely geared towards the devolution of powers from Westminster to local authorities, Schedule 31 of the Bill introduces a surprise ban on Upwards Only Rent Review (“UORR”) clauses in commercial leases in England and Wales. These proposals (considered below) have drawn criticism in the property industry owing to anticipated unintended effects on the market and a lack of prior consultation and engagement with key stakeholders.
What are Upwards Only Rent Reviews?
Commercial leases in England and Wales often provide that, on review, the revised rent shall be the higher of (i) the open market rent and (ii) the passing rent at the date of review. Where such provisions apply, rents can never decease – even if market conditions and rents decline.
Why the proposed ban?
UORR clauses have been a longstanding feature of commercial leases in England and Wales, offering income certainty to landlords and predictability for investors. Such clauses can however pose challenges for tenants given the twin problems of excessive rents (which do not align with market conditions) and difficulties in assigning leases containing UORR provisions.
The Government has cited the following reasons for the proposed ban:
“UORR clauses lead to a number of market inefficiencies including higher rents during economic downturns, leading to lower profits for tenants and risk of higher prices for consumers. Stakeholders, including small businesses and academics, report that UORR clauses are artificially inflating commercial rents and ultimately pricing out small businesses from town centres.”
Conversely, there has been some criticism from certain commentators that the proposals may present a risk to investor confidence in the current climate when there are already serious challenges to development viability. Other commentators have highlighted the market trend towards shorter leases, often five years in length, which may never get to review thereby reducing the potential effectiveness of the proposed reforms.
The proposals
Broadly, the Bill would insert two new Schedules into the Landlord and Tenant Act 1954 (“the 1954 Act”), which would:
prohibit UORR clauses in new and renewal business tenancies, being those to which Part II of the 1954 Act applies (including leases contracted outside of the security of tenure provisions the 1954 Act). The ban would not apply retrospectively;
permit index-linked reviews provided that rents can increase or decrease in line with the relevant index;
permit stepped rents, provided the amount of future rent is specified at the time the lease is entered into;
prohibit put options obliging tenants to enter into leases where the rent is unascertainable at the time of entry into the option; and
introduce other anti-avoidance provisions preventing circumnavigation of the proposed ban.
Next Steps
The Bill is its infancy, with the second reading expected in September 2025. Lawmakers will need to navigate the inherent tensions between promoting tenant-friendly reforms and safeguarding the interests of landlords and investors, and the stability of the market.
Laytons’ Real Estate department will continue to monitor and provide updates regarding the Bill. If you have any questions regarding the Bill and its consequences, please contact Harry O’Donnell at harry.odonnell@laytons.com or your usual contact in the Real Estate team at Laytons.
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Disclaimer: This publication is provided by Laytons LLP for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to your regular contact at Laytons LLP or Laytons’ Real Estate team.