“…perhaps the boldest intervention in leasing practice in a generation.”
18/07/2025Jul 2025 – It’s rare for me to include an article on RRM written by someone else but I think the following is excellent. So, by kind permission of the author, Tom Pope of Lightlease:
“The government’s announcement this week to ban upward-only rent reviews (UORRs) in commercial leases across England and Wales is perhaps the boldest intervention in leasing practice in a generation. Part of a broader push to empower communities and revitalise local economies, the change zeroes in on a clause that has quietly shaped British high streets for decades — and arguably helped hollow many of them out. But make no mistake, this is pretty seismic for all of us working in this sector!
It’s rare that something as arcane as rent review mechanics ends up in a government bill. But here we are. And while investor nerves are understandable, it’s hard not to see this as a long-overdue correction — especially for those of us who spend our time advising occupiers. Let’s start with where this matters most: retail and leisure. Unlike offices or warehouses, where lease lengths are shorter and break clauses more common, these sectors have historically been tied into long, rigid leases with upward-only reviews baked in. Once rent goes up, it never comes down — regardless of what’s happening in the local market, consumer demand, or a tenant’s performance. That rigidity has hurt. It’s left businesses stranded on pre-Covid rent levels in post-Covid economies. It’s propped up book valuations while units sit empty. And it’s stifled the very thing we need most right now: flexibility. We’ve seen occupiers opt for CVAs or closures rather than stomach rent levels that simply don’t reflect reality.
So a ban on upward-only clauses? It’s radical. But it’s also refreshingly pragmatic. Why should rent be a one-way street, when everything else in the market — demand, footfall, consumer habits — fluctuates constantly? The move is framed as part of a broader effort to rejuvenate town centres. In truth, it’s about fairness. Tenants should share in the risk, yes — but so should landlords. If the market turns, rents should be allowed to adjust.
That’s not revolutionary. For a glimpse of how this might play out, one can look to Ireland, which outlawed upward-only rent review clauses back in 2010 for new commercial leases. That change came amid Ireland’s post-2008 financial crash, when plummeting property markets and struggling retailers pushed the government to act (similar to the UK now wanting to save its high streets). Irish law now mandates that any rent review clause must be “upward or downward”, allowing rent to adjust to market rental value whether that is higher or lower. By most accounts, this has made the landlord-tenant relationship more equitable: tenants aren’t stuck overpaying if the market tanks, and leases better reflect real economic conditions. It’s palpably more fair, because the risk is shared – the landlord benefits when times are good, but also takes a hit when times are bad, rather than the tenant absorbing all the pain. Notably, despite dire warnings from investors in 2010, Ireland’s commercial property market did not collapse into irrelevance. While there was initial uncertainty (and an unsuccessful push to apply the ban retroactively to older leases, which the Irish courts blocked on constitutional grounds), the market adjusted. Irish landlords have since had to price in the possibility of downward rent movements – which likely meant slightly higher initial rents or other concessions – but the sky didn’t fall. In fact, Ireland today still attracts significant real estate investment, showing that flexible rent reviews can coexist with a healthy property market.
It’s no surprise that many landlords and property investors are alarmed by this proposal – it effectively overturns a long-standing pillar of commercial real estate finance. Upward-only rent reviews have been so embedded in UK practice since the 1960s that property valuations and investment models grew to rely on them. For a landlord (especially large institutional investors like pension funds or REITs), a UORR clause was a safety net, ensuring that the income from a property would never dip below a baseline. It shifts the entire downside risk of the market onto the tenant. Investors have treated that guaranteed or steadily rising income stream almost like a bond – and priced assets accordingly. Take away the guarantee, and suddenly the future cashflows from a commercial lease become uncertain both up and down.
Of course, there are risks. The industry’s concern is less about the principle and more about the uncertainty. UORRs have long underpinned how commercial property is valued — they provide a guaranteed income floor, which in turn supports lending, investment, and development. Take that away, and there’s a ripple effect across portfolios and pricing models. A drop in valuations is likely, and for some landlords, that will be painful.
There’s also the real prospect of unintended consequences, particularly in how landlords will adapt lease structures in response. One likely workaround could be a push for index-linked rents – tying rent increases to inflation (RPI or CPI) instead of open-market reviews. Index-linked leases have become more common in recent years and typically don’t allow decreases. If every landlord suddenly insists on uncapped RPI-linked reviews as a substitute, tenants could actually face a different hazard: spiraling rents in high-inflation times. To be workable, the law should ensure rents could fall if the formula or market conditions dictate. In other words, the spirit of the reform is to make rents reflect market conditions – but a crude inflation clause might still guarantee upward-only rent in practice (inflation almost always being positive) and possibly yield even sharper rises than the market would. Tenants will need to stay savvy in lease negotiations to avoid new pitfalls. Ironically, there is a valid argument that by removing one blunt tool (UORRs), the government might spur a flurry of rent disputes in the future. With no guaranteed uplift, every rent review could become a dogfight over what the “true” market rent is, possibly leading to more arbitrations and court referrals.
Property lawyers note that alternative rent review models could gain popularity: for instance, turnover rents (rent based on a percentage of the tenant’s revenue), or “cap and collar” arrangements (which allow rent to fluctuate within a upper and lower band). Such mechanisms can offer a fair middle ground – ensuring rent can fall, but not by an extreme amount, or that landlords share in a tenant’s success rather than just their pain. The new law doesn’t forbid these creative structures; it simply outlaws the one-sided guarantee of no decreases. Indeed, upward and downward rent reviews have technically always been possible by agreement (just seldom used).
Landlords will essentially face a choice: stick to fixed rents for the term, or allow rents to rise or drop at review. The most obvious is outcome, which was becoming more prevalent anyway is a shift towards 5 year ex-act leases, giving landlords greater control of their asset after 5 years, but that won’t work with all tenants. Some of our clients write their shop-fit down over a longer period than 5 years.
But that doesn’t mean the status quo was working. UORRs created a distorted playing field, where over-rented units lingered long after their commercial logic had expired. They fuelled a kind of rental inertia — pushing landlords to keep units vacant rather than accept lower rents that might reset a valuation. I have been involved in countless situations with clients unable to shift a property because of an outrageously high rent that did not reflect the market, sometimes over-rented by more than 100%. That sort of behaviour protects a spreadsheet, but not a street.
This change could bring property values back in line with occupier economics — and that might be a good thing in the long run. It might also encourage more lease structures based on performance, flexibility, and genuine partnership. Turnover rents, mutual break clauses, and market-tracking reviews all have a role to play in a more adaptive leasing environment.
For occupier-led advisors like Lightlease, this reform aligns with a shift we’ve championed for some time: putting reality back at the heart of rent negotiations. If the market moves, so should the lease. That shouldn’t scare landlords. It should focus them — on securing good operators, building long-term relationships, and keeping buildings vibrant and let.
The ban applies only to new leases and renewals, so the existing investment landscape won’t unravel overnight. But it does mark a turning point — and one that many of us will welcome. It may force discomfort in the short term, but in the medium term, it could lead to a more honest, resilient, and ultimately investable market.
Will this intervention spark the renaissance of Britain’s high streets, or will it spook the very investors needed to rejuvenate them? The answer may lie in how both sides respond. If landlords pragmatically embrace more collaborative lease structures (rather than simply fighting or circumventing the law), and if tenants use their new leverage responsibly (not demanding unrealistic cuts but fair market rents), the outcome could be a more resilient, dynamic commercial property sector. At the very least, this policy has got everyone talking – and rethinking assumptions that seemed carved in stone. After years of seeing one side win at the expense of the other, the rent review battlefield might just become a place for genuine negotiation again. High streets have been crying out for change, and at long last, they’re getting one. Whether that change proves to be a saviour or a setback will be closely watched by communities and investors alike.
I’m not trying to understate the impact this could have on the investment and valuation market, but the last 10 years has shown us the unsustainability of the current lease model and travelling the length and breadth of the country, I have seen the impact of this, (and I’m not suggesting UORR are the only contributing factor) on once vibrant communities. For those of us living or working in London, it’s easy to forget about those areas outside of the prime retail and leisure pitches we visit, but most of us will have seen vivid examples of the degeneration of so many locations, it would be foolish to disregard the powerful ramifications it has on our society, culture and even politics.
I have seen today a great deal of commentary criticising the move, particularly over the lack of consultation with the sector, an understandable point of contention. But I would argue that this era requires more radical policies. Some may call the government’s move a high stakes gamble (hence the cover image), but I wanted to outline some of the positives to be drawn from the news. This will naturally be a divisive topic, but no harm in a healthy debate. Yes — this is big. And yes — it deserves scrutiny. But if you care about the future of our high streets, and recognise the critical role they play in the narrative of our country, you might just find yourself quietly on board. “
Tom Pope
https://lightlease.co.uk/team-1/tom-pope-7s779
[Michael Lever: Tom’s remark about index-linked reviews, a cap and collar would fall foul of the ban because the collar fixes a minimum. But a cap only would be ok. There is nothing in Bill 2025 to prevent a landlord from agreeing a ceiling on the rent.]
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