After the Upwards-Only Rent Review: The Bigger Story in Schedule 31
Why the headline ban is the smaller change — and what 17 March 2026 already did to commercial leasing in England and Wales.
The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April. Within hours, the property press had its angle: tenants win, landlords lose, the high street finally gets a break. It is a clean narrative, and it is almost entirely beside the point.
The interesting movement in this Act did not happen on 29 April. It happened on 17 March, when a Lords amendment quietly retrofitted the new regime onto renewal options that were already being signed. By the time the Bill reached Royal Assent, the most consequential drafting in Schedule 31 had been operating for six weeks. Most of the market is still catching up.
The headline ban on upwards-only rent reviews is the smaller story. The bigger one is that Schedule 31 has broken three structural assumptions of UK commercial leasing — and the firms, landlords and tenants who understand that now will define the next decade of practice.
The headline, briefly
Schedule 31 inserts a new Schedule 7A into the Landlord and Tenant Act 1954. Once commencement regulations bring it into force — expected in 2027 after a consultation on caps and collars — upwards-only rent review (UORR) clauses will be void in any business tenancy within Part II of the 1954 Act, including contracted-out leases. The ban applies whether the rent is reviewed by reference to open market value, indexation, or turnover, wherever the mechanism contains an upwards-only element. Stepped or fixed uplifts survive, because the reviewed figure is ascertainable on grant. Genuine upwards/downwards reviews survive too. Parties cannot contract out.
That much has been competently summarised across every major firm's update in the past fortnight. The following three points have not.
Shift one — the contractual renewal option becomes a landlord liability
This is the move that has caught the market off guard. The Lords amendment, moved by Baroness Taylor of Stevenage and surviving ping-pong, applies the ban not only to leases granted after commencement but to any lease granted pursuant to a tenancy renewal arrangement entered into on or after 17 March 2026. The drafting captures put options, call options and any agreement for lease with the existing tenant — not just formal options-to-renew. The ban then bites on the day-one rent under the renewal lease and on every subsequent review.
The consequence has not yet been fully digested. A landlord granting a new lease today, with a contractual right to renew on open-market terms at expiry, is not securing income certainty. It is granting a one-way ratchet against itself. The renewal rent can fall below the passing rent. Subsequent reviews cannot recover the gap. The option that traditionally protected the landlord's investment now operates as a tenant put.
Expect contractual renewal options to disappear quickly from new institutional leases. Landlords will rely instead on either market re-letting at expiry or the statutory regime under sections 24 to 28 of the 1954 Act — an irony given that the policy intent of the Act was to reduce landlord control over rent. Tenants paying attention have a genuine opportunity here: a renewal option negotiated now confers something close to the protection of a statutory renewal, without the procedural cost or the litigation risk. That is a meaningful commercial gain, and it is available only for as long as landlord-side advisers are slow to adjust their precedents.
Shift two — the sub-lease sandwich
Existing leases are not retrospectively rewritten. A landlord under a head-lease granted before commencement keeps the benefit of its UORR against the head-tenant. But the head-lease typically also requires the head-tenant, when sub-letting, to impose UORR review terms on its undertenant. That requirement becomes void on commencement. The head-tenant then sub-lets on upwards-and-downwards review terms — because it has no choice — while paying upwards-only rent up the chain.
That is a sandwich, and the head-tenant is in the middle of it. In a falling market, the head-tenant cannot recover from its undertenant the rent it remains contractually obliged to pay its landlord. The risk has moved, not disappeared.
For portfolio investors holding long head-leases — particularly in retail, leisure and secondary office — this should be modelled now. The covenant strength of the head-tenant matters more than it did six months ago. So does the head-lease term remaining, the sub-let strategy, and any provision in the head-lease that gave the superior landlord control over sub-lease review terms. That control is gone. Portfolio reviews should flag the exposure and, where possible, address it through targeted re-gear or covenant negotiation before commencement.
Shift three — the slow death of the open-market review
The open-market rent review has been the default review mechanism in UK commercial leases for forty years. It is also the form of review most exposed to the new ban: any open-market mechanism with an upwards-only element is void. Strip out the upwards-only element and you have a genuine market review — which most landlords have spent four decades drafting to avoid.
The market response is already visible in the draft leases coming across desks this month. Stepped rents and index-linked reviews — both of which sit outside the ban's scope — are gaining ground at the expense of open-market mechanisms. These are not new structures. They have been used routinely for years in build-to-rent, logistics and certain institutional retail. What is new is their migration into asset classes that historically resisted them: high-street retail, secondary offices, mid-market industrials.
Combine that migration with two further pressures the Act creates — landlord appetite for shorter terms, and more frequent break opportunities to give landlords legitimate market-rent-resetting moments outside the review mechanism — and the architecture of UK commercial leasing has changed. The rent will increasingly be set on day one and on each break or expiry, not reviewed mid-term. That is a structural reset, not a tenant concession.
What this means in practice
Five things, briefly. Landlord-side, retire contractual renewal options from new institutional leases unless the rent-setting mechanic is genuinely two-way and you have a clear commercial reason to accept the downside. Tenant-side, push for a renewal option in any lease being granted now where you have the negotiating leverage; the value transfer is real and the window is open. Investor-side, audit head-lease portfolios for the sandwich exposure and price it into hold-versus-sell decisions before commencement. Lender-side, revise valuation instructions and ICR modelling to allow for downward rent movement on review and renewal — particularly on assets with post-17 March renewal options. Adviser-side, retire the open-market UORR clause from your standard precedent and road-test stepped, indexed, and genuine two-way alternatives now, ahead of the consultation. The firms that arrive at commencement with tested precedents will move faster, and charge better, than those still drafting from scratch.
Close
The English Devolution and Community Empowerment Act has been received as a piece of high-street politics. Read carefully, it is something more interesting: the most substantial reset of UK commercial leasing economics since the 1954 Act itself. The headline ban is the part that will get the press. The structural shifts beneath it — the death of the contractual renewal option as a landlord tool, the sub-lease sandwich on existing portfolios, and the migration away from open-market reviews — are the part that will move money.
Commencement is twelve to eighteen months away. The caps-and-collars consultation will shape the operative regime. There is, in other words, a window — narrow but real — to position portfolios, retool precedents, and re-price renewal exposure before the new architecture sets. The market is already moving. The question is whether you are moving with it, or watching it happen.
Tariq is a UK-qualified real estate solicitor and consultant, with over 25 years' experience across commercial and residential conveyancing, bridging finance, lease extensions, and contentious property work. STM advises landlords, tenants, investors and lenders on lease structuring, portfolio strategy and complex transactional matters.
If the points raised in this piece touch on a live transaction, a portfolio you hold, or a precedent you are reviewing, I am happy to take questions directly. Get in touch via our bookings page.
This article is written for general information and discussion. It is not legal advice and should not be relied upon as such. Specific transactional advice should be taken on the facts of each matter and on the latest published statutory text and any commencement or transitional instruments in force.