On 10 July 2025 the government presented the English Devolution and Community Empowerment Bill to parliament. The bill is intended to support the government’s plans to rebuild and reform local government and to give communities stronger tools to shape their local areas. The stated policy aims are to 'make commercial leasing fairer for tenants, ensure high street rents are set more efficiently, and stimulate economic growth.'
The bill proposes a ban on upwards-only rent reviews in new commercial leases and lease renewals governed by the Landlord and Tenant Act 1954. For landlord’s in the healthcare sector, these potential reforms could have a significant impact on rental income, valuations, and future lease negotiations.
In this article we provide a definition of an upwards-only rent review and what the ban could mean for property owners and occupiers in the healthcare sector.
What is an upwards-only rent review?
Upwards-only rent reviews have long been standard in commercial leases. They ensure that at review dates, rent either remains the same or increases, guaranteeing that rent will never decrease regardless of the market conditions, providing landlords, investors, and lenders with predictability of income.
What could the ban mean for property owners in the healthcare sector?
Predictability of income
- Healthcare providers often enter into long leases with upwards-only rent reviews or open market reviews providing certainty that rents will not drop at review.
- Upwards-only rent reviews provide certainty of rental growth, a ban could mean that rents are linked to market conditions, meaning rents may fall during economic downturns, affecting cash flow and future financial planning.
Property valuations
- Valuations are usually based on a guaranteed stream of income. The reduced certainty of future rental income may impact property and portfolio valuations as valuers become more conservative with their valuations.
Negotiation strategies
- A ban on upwards-only rent reviews will see the market move towards alternatives. Landlords may move towards index-linked or stepped rents, prefer shorter lease terms (or longer terms with break clauses) without reviews.
- Landlords may want to consider/negotiate improved break options.
Lease renewals
- The ban is not expected to come in until 2027/2028, however it's worth noting that any lease renewals due in 2027/2028 containing upwards-only provisions will need to be amended to comply with the ban.
- Parties negotiating new or renewal leases will wish to complete them prior to the ban.
Increased tenant power
- Tenants cannot currently benefit from falling market rents, therefore a ban would allow tenants opportunities to negotiate lower rent when the market has declined, when previously they would not be able to do so.
- Tenants will no longer be restricted to only the landlord initiating a rent review. Under the revised law, they would be able to trigger a review themselves.
- The bill also includes measures to prevent mechanisms that try to circumvent the ban, including by way of side letter or clauses that only permit a landlord to trigger a rent review.
If you have any questions about how the proposed ban could affect your leases or property portfolio, please contact our real estate team for further guidance.
