Labour’s proposal to ban upward-only rent reviews in commercial leases is expected to have significant financial consequences for commercial landlords across the UK. Experts warn that this policy could reduce property values by billions of pounds, impacting pension funds and investment in regeneration projects. Understanding these changes is crucial for landlords and agents managing commercial property portfolios.

Background on upward-only rent reviews

Upward-only rent review clauses are a common feature in commercial leases, typically occurring every three to five years. These clauses allow landlords to increase rent or keep it the same at each review, but crucially, they do not permit rent reductions even if market conditions decline. This mechanism provides landlords with income stability and predictability, which is particularly important when managing long-term commercial property investments.

Government’s proposed ban and its rationale

Under the English Devolution and Community Empowerment Bill announced last year, the government plans to prohibit upward-only rent review clauses in new commercial leases. The intention behind this reform is to create a fairer leasing environment for tenants and to stimulate economic growth by preventing fixed costs from escalating unchecked. Existing leases containing upward-only clauses will remain valid until their term ends, so the changes will only affect new contracts.

Potential financial impact on landlords and investors

Martin Beck, a former Treasury economist, has highlighted the possible negative effects of the ban. He warns that the policy could trigger a 15% slump in commercial property prices, resulting in losses amounting to billions of pounds for landlords. Pension funds, which hold approximately £96 billion in commercial property assets, could see a significant reduction in portfolio values. Beck emphasises that the ban risks undermining investment in vital sectors such as town-centre regeneration, data centres, and mixed-use developments.

He explains: “The government is right to want to protect small businesses from rising fixed costs, but it has overlooked a serious downside of how this policy is drafted. By applying a blanket ban on upward-only rent reviews across all commercial property, it risks undermining the very investment that funds town-centre regeneration, data centres and mixed-use developments. That could knock billions off property values, weaken pension returns and make many regeneration schemes simply stack up no longer.”

Alternative rent review mechanisms

In place of upward-only rent reviews, landlords will be able to offer alternative rent structures such as fixed or stepped rents, index-linked or turnover-based rents, and market rent reviews that reflect both upward and downward rent movements. These options aim to balance tenant protection with landlord interests, though they introduce more variability and potential risk for landlords’ rental income streams.

Implications for UK landlords and agents

For landlords and letting agents, the proposed ban represents a significant shift in commercial lease negotiations and portfolio management. The removal of upward-only clauses means landlords must carefully consider alternative rent review methods that provide sufficient income security while complying with new regulations. This may require more detailed market analysis and flexible lease drafting to accommodate fluctuating rental values.

Furthermore, the potential decrease in property values could affect landlords’ borrowing capacity and investment strategies. Pension funds and institutional investors may reassess their commercial property holdings, which could influence market dynamics and regeneration funding. Landlords should stay informed about these developments to adapt their business models accordingly.

Looking ahead: support for landlords

In response to ongoing changes in the property sector, The Landlord Association (TLA) is launching a new Trusted Partners Hub in Q1 2026. This initiative will feature verified and approved service providers to support landlords, tenants, and property management businesses. Legal, trades, insurance, financial, mortgage, tenant screening, and other service providers are invited to register their interest at landlordassociation.org.uk/become-a-tla-service-partner/. This resource aims to help landlords navigate regulatory changes and maintain effective property management practices.