New legislation banning upwards-only rent reviews (UORRs) for commercial property is unlikely to save the high street and may fall short of the government's aims, according to a legal expert at Morr & Co LLP.
The English Devolution and Community Empowerment Act 2026 has now received royal assent and is expected to come into force in 2027. The act will significantly change commercial property leases, applying to all business tenancies, including those that fall within the Landlord and Tenant Act of 1954.
Ministers hope the change could halt spiralling rents for businesses whose negotiating power is limited by UORRs, a mechanism that ensures rents can only rise, never fall, at review. But Nick Leavey, commercial property partner at law firm Morr & Co, has significant doubts the impact will be as powerful as many hope, having studied the effects of similar legislation in Ireland.
"The government's proposed ban on upwards-only rent reviews is undoubtedly well-intentioned, particularly at a time when so many businesses on the high street are already under pressure," said Nick Leavey, commercial property partner at Morr & Co. "But I would be surprised if it ends up having the dramatic impact that some people are expecting.
"For decades, upwards-only rent reviews have been standard practice in commercial leases. They have generally favoured landlords and investors because they provide certainty that rents will not reduce over time.
"On the face of it, removing that mechanism sounds like it should help tenants, particularly retailers, hospitality operators and leisure businesses facing rising costs and changing consumer habits. The reality, though, is that the commercial property market is usually very good at adapting."
Leavey expects landlords to find workarounds to the new rules, including:
- Fixed annual rent increases that give tenants certainty but not necessarily lower costs
- Shorter leases, as landlords weigh the risks of agreements no longer guaranteed to rise in value each year
- Additional costs for tenants, such as legal, surveyor, administration and stamp duty fees tied to more frequent lease renewals
He pointed to Ireland, where UORRs were banned in 2010 under comparable legislation, as a guide to how the market might respond. "The experience in Ireland suggests the market will adapt its behaviour rather than fundamentally change direction," he explained.
"The much wider challenge for the high street is driven by a range of issues, from online retail to hybrid working, rising operational costs and changing consumer behaviour. Against that backdrop, this reform may end up being more of a small adjustment to how leases are structured than the game-changing intervention some are hoping for."
His advice to both landlords and tenants is to prepare for change, but without raising expectations too high. "The regime is going to be different," he said.
"For landlords, they may need to agree rent increases up front, which means tenants at least have certainty across the lease. But the idea of rents going down seems very unlikely. I don't think this legislation is going to help tenants as much as it is intended to."
