The Government’s proposal to ban Upwards Only Rent Reviews (UORRs) in commercial leases – announced as part of the draft English Devolution and Community Empowerment Bill – signals a potentially significant shift in the UK leasing landscape.
While still at an early legislative stage, the proposal has already created ripples across the market. At Newsteer, #OurSteer is clear: this is a moment that warrants early strategic action from both landlords and occupiers.
What are Upwards Only Rent Reviews?
UORRs are lease provisions that allow rents to rise or remain flat at review – but never fall, even if market values have declined. These clauses have long underpinned investor confidence and institutional valuation models, but are widely criticised by tenants who see them as inflexible and outdated.
The proposed legislation would prohibit UORRs in new leases granted after the legislation is passed. Importantly, existing leases would be unaffected.
Key facts at a glance
- The proposal is not yet law and no date has been set for the Bill’s second reading.
- The ban would not apply retrospectively.
- It would impact only new leases agreed after the legislation takes effect.
- The Government did not consult the property industry in advance of publication.
#OurSteer
1. Tenants are likely to take the initiative
From a tenant perspective, the message is clear: the time to act is now.
We spoke to Josh Warner, Legal Director at DAC Beachcroft, who notes:
“If the proposed ban (in its current form) is legislated during the term of a relevant lease, the tenant will be locked into the terms of that lease. Tenants may therefore seek to capitalise on the uncertainty created by the Bill and ask for more favourable rent review terms now.”
In practice, this could mean tenants pushing for:
- Upward/downward reviews
- Shorter leases with no reviews
- Stepped rents
- Longer leases with tenant-only rolling breaks
This is already prompting a reassessment of standard lease models across several sectors, and we expect rent structuring to become a far more negotiated component of lease terms – regardless of whether the ban is ultimately passed.
2. Landlords are already adjusting their position
Landlords, in response, may look to:
- Accelerate existing lease transactions to fall outside the scope of any new legislation
- To mitigate the risk of uncertain income streams, Landlords could price in additional risk with higher initial rents. Negotiate fixed stepped increases, which are unaffected by the proposed legislation, rather than rely on open market rent reviews or index-linked reviews.
- Depending on the specific market dynamics, some Landlords may seek to grant shorter leases with no security of tenure, to re-negotiate the open marker rent at expiry.
Josh adds:
“We expect landlords to review pipeline transactions and consider whether to bring forward agreements for lease. In the short term, tenants may have the upper hand, as they can seek upsides on lease terms they wouldn’t have otherwise been entitled to.”
3. Sector impact will vary – and so will risk
The impact of the ban is likely to differ across asset classes:
- In secondary and tertiary locations, where market rents have declined or stagnated, the removal of UORRs could significantly alter investment assumptions – particularly where passing rents exceed open market levels.
- In prime locations, the practical impact may be limited, but valuation models based on guaranteed uplifts could still face adjustment.
We see this as a continuation of the trend toward asset-led underwriting, where location, ESG credentials, and long-term relevance are more critical than lease mechanics alone.
Wider implications for investors
The institutional real estate market – including pension funds and insurers – has long relied on UORRs to support predictable income streams. Any reform will need to be considered in the context of broader financial services impacts, and we expect this to be a key point of debate as the Bill progresses.
There are also clear parallels with residential leasehold reform, which has impacted pricing in the freehold ground rent investment space. Commercial leasehold reform may follow a similar path, though legislative timelines remain uncertain.
Legislative context
The UORR proposal follows the Law Commission’s review of the Landlord and Tenant Act 1954, which recommended retaining the current security of tenure model and the process for contracting out.
Together, these developments suggest an appetite for incremental modernisation rather than wholesale reform – but they also reinforce the need for robust, flexible lease strategies as the policy landscape evolves.
Our recommendations
While the legislation may be months – or even years – away from enactment, the market is already moving. Rent review mechanics, lease term structuring, and the assumptions that underpin income-driven investment models are all coming under greater scrutiny.
We recommend:
- Reviewing current lease exposure
- Engaging early on upcoming renewals and regears
- Modelling the implications of stepped or downward rent reviews
- Ensuring valuation, agency and legal advice is aligned
At Newsteer, we’re working across sectors to support clients in navigating these changes – helping protect income, manage risk and make informed decisions in a shifting landscape.
To discuss how this may affect your portfolio or leasing strategy, get in touch with our team:
Occupier Advisory
Asset Advisory: