New legislation to ban upwards-only rent reviews (UORRs) for commercial property are unlikely to save the high street and may not achieve government aims, according to a legal expert at Morr & Co LLP.
The much-heralded English Devolution and Community Empowerment Act 2026 has now received Royal Assent and is expected to come into force in 2027.
It will significantly change commercial property leases, applying to all business tenancies, such as those that fall within the Landlord and Tenant Act of 1954.
The hope is that it could halt spiralling rent for businesses whose negotiating power is limited by UORRs, which ensure rents can only go up, not down 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 impact of similar legislation in Ireland.
He said: “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.
“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.”
Nick expects landlords to find workarounds, including fixed annual increases which give tenants certainty but not necessarily lower rents.
He also sees potential for shorter leases becoming more common as landlords consider the risks of a lease which is no longer guaranteed to rise in value each year.
“That could add costs for tenants, including legal, surveyor, admin and stamp duty costs,” he said.
Nick points to evidence in Ireland, where UORRs were banned in 2010 through similar legislation.
He said: “The experience in Ireland suggests the market will adapt its behaviour rather than fundamentally change direction.
“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.”
Nick’s advice to landlords and tenants is to prepare for change but without major expectations.
He said: “The regime is going to be different. 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.”
