The ban’s not in force yet, but The English Devolution and Community Empowerment Act, (Act) which contains the ban has received Royal Assent and the ban is currently expected to come into effect late 2027 or early 2028. The ban would apply to all business tenancies in England and Wales.
The ban would mean that where a lease says that on rent review the rent will rise to the higher of the existing (passing) rent and eg an open market value rent, or an index-linked rent, then the word “higher” is automatically ignored.
On rent review any new rent would simply be the open market rent/index-linked rent, regardless of whether it goes up or down. The existing passing rent becomes irrelevant. For example if a rent review clause provides for an upwards only rent review to the higher of open market rent and the £55K p.a. passing rent, if the open market rent is £50k p.a. the reviewed rent would be £50k p.a.
In practical terms, a rent review index-linked to eg CPI may prevent a revised rent falling below the passing rent, since historically the CPI does not go negative. Landlords are also already starting to look to “CPI + [X ]%” rent review options which do not currently appear to be expressly prohibited by the Act. However, this rather obvious loophole would appear vulnerable to closure by the government.
Landlords are also looking at using fixed “stepped” rents (eg rent of A in year 1, B in year 2, C in year 3 etc) which are not prohibited. There is widely expected to be a trend towards shorter fixed-term leases too, to avoid the uncertainty of rent reviews under the Act.
For the most part, the ban will not be retrospective. Existing leases and leases entered into before the date that the Act comes into force will not be subject to the ban. However, there is one exception, applying to a “tenancy renewal arrangement” entered into on or after 17 March 2026.
“Tenancy renewal arrangements” can be options or agreements for a new lease entered into with an existing tenant, whether contained within an existing lease granted on or after 17 March 2026, or in a separate document dated on or after that date.
The ban would apply to the rent payable at the start of a new lease granted pursuant to such “tenancy renewal arrangement” and to any rent review that it contains during its term.
Where any business tenancy (whether granted before or after the Act is in force) requires that a sublease contains an upwards-only rent review, that requirement will be ineffective once the Act is in force. The intermediate tenant and subtenant are then free to agree on rent review terms for the sublease with no need to obtain the head landlord’s approval of them.
If there is a rent review mechanism in a lease which only the landlord can trigger, the Act allows the tenant to also trigger that review (preventing landlords from only triggering a review in an upwards market).
There are anti-avoidance provisions preventing side arrangements which would require tenants to pay top-ups where rent has been reviewed downwards.
The government has promised a consultation exploring the possibility of permitting balanced caps and collars in rent review provisions. In practice, this could allow a downwards collar of, say, 3% and a corresponding cap of 3%. However, there is no guarantee that this will be the outcome.
The ban is on its way and will have a significant impact.
