New lease rules ahead – The end of upward-only rent reviews for commercial properties

The Government has announced plans to ban upward-only rent reviews in commercial leases – a move that’s been especially welcomed by the hospitality and retail sectors, where businesses have long struggled under rigid lease terms and escalating rents. But what does this proposed change actually mean for tenants already in leases, or for those negotiating new ones? 

Whether you're a growing business looking for your next premises or already tied into a long-term lease, it’s important to understand the implications of these changes, the risks that remain, and what you can do to protect your business. 

What are upward-only rent reviews? 

Upward-only rent reviews mean that, at agreed review dates (often every 3 to 5 years), the rent can only stay the same or increase – even if market rents have fallen. 

These clauses have traditionally favoured landlords, providing certainty over income. But for tenants, particularly in sectors like hospitality and retail where margins are tight and trading conditions unpredictable, they can create a long-term financial burden. 

What’s changing? 

While we’re still awaiting detailed legislation, the Government has confirmed its intention to ban upward-only rent reviews for new commercial leases. This means that rent reviews will need to be more flexible, potentially allowing for market-adjusted increases or decreases. 

The keyword here is new. If you already have an upward-only rent review clause in your lease, this change won’t apply retrospectively unless specifically legislated. 

What this means for: 

Existing leaseholders 

If you’re already signed into a lease with upward-only rent reviews, unfortunately, this change won’t impact your current agreement unless renegotiated. You’ll still be tied to the review mechanism already in place. 

That said, this announcement could strengthen your negotiating hand if you're seeking a lease variation or extension, especially if your landlord is looking to retain you as a tenant in a challenging market. 

Tenants negotiating a new lease 

If you're taking on a new lease, now is the time to push for more tenant-friendly rent review clauses – ideally based on open market rent or RPI (Retail Price Index) increases with caps and collars. Even once the ban is in force, it’s important not to assume landlords will remove all upward-only mechanisms automatically. Clauses can still be framed to benefit landlords in practice. 

Early legal advice can help you secure fairer, more flexible terms – potentially saving you significant sums over the lease term. 

Original Tenant Liability: No longer automatic, but still risky 

The Government has also reaffirmed that “original tenant liability” – where the first tenant remains liable for lease obligations even after assigning the lease to someone else – is no longer automatically included in new leases. 

However, landlords can (and often do) insist on alternative protections such as: 

• Personal guarantees from directors 

• Rent deposits 

• Authorised Guarantee Agreements (AGAs) – which reinstate liability if the incoming tenant defaults 

So while “original tenant liability” may not be named, tenants should be cautious. Taking on or assigning a lease can still expose your business (or you personally) to future liabilities unless these are carefully negotiated and limited. 

Pitfalls to watch out for when taking on a lease 

Leases are long-term commitments with financial and legal implications that can trip up even the most experienced business owner. Common pitfalls include: 

• Ignoring break clauses: Missing the fine print on how and when you can exit a lease can leave you stuck for years. 

• Failing to cap service charges: Open-ended service charges can result in unexpected annual costs. 

• Underestimating repairing obligations: “Full repairing” leases can leave tenants responsible for major structural repairs, even in older buildings. 

• Not documenting incentives properly: If your landlord offers a rent-free period or contribution to fit-out, make sure it's in writing. 

• Assuming liabilities end with an assignment: Even after leaving the premises, you could be on the hook for rent if the incoming tenant defaults – unless your legal team has negotiated otherwise. 

Final thoughts 

These proposed changes are a step in the right direction for tenants – particularly in sectors hit hardest by high overheads. But don’t rely on legal reforms alone. The fine print still matters, and landlords will look for other ways to protect their income. 

Getting specialist legal advice before you sign can help you avoid hidden liabilities, improve your negotiating position, and ultimately save your business money. 

If you're considering a new lease or need help reviewing your current terms, our team of commercial property lawyers can support you with clear, practical advice tailored to your business.