Why commercial landlords should be paying attention to a devolution law

When the English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026, most headlines focused on mayoral powers, community ownership rights and local government reform. Less publicised was a provision that could have a profound impact on commercial property owners, investors, landlords and agents across England and Wales: the ban on upwards-only rent reviews in commercial leases. [gov.uk], [bills.parliament.uk]

For decades, upwards-only rent review clauses have been a cornerstone of the UK commercial property market, providing landlords with certainty that rental income could increase but would never decrease at review. The new legislation fundamentally challenges that model. Once the relevant provisions come into force, expected during 2027, many commercial rent reviews will need to operate on an upwards-and-downwards basis, allowing rents to move in line with actual market conditions.

For commercial landlords, investors, developers and managing agents, this is more than a lease drafting issue. It represents a significant shift in risk allocation, investment strategy and asset management.

What is changing under the Act?

The English Devolution and Community Empowerment Act 2026 introduces restrictions on upwards-only rent review mechanisms in business tenancies. The legislation is designed to prevent tenants from being locked into rental levels that no longer reflect market realities, particularly during periods of economic downturn or changing trading conditions. [gov.uk],

The ban is expected to affect several common forms of commercial rent review, including:

• Open market rent reviews
• Index-linked rent reviews
• Turnover-based rent reviews where an upwards-only mechanism applies
• Renewal leases that fall within the legislation's scope

Fixed or stepped rental increases that are agreed at the outset of the lease are expected to remain permissible because the future rent is known at the time the lease is granted.

Why this matters to commercial property investors

A property's value is often closely linked to the reliability and predictability of its income stream. Upwards-only rent reviews have historically provided investors and lenders with confidence that rental income would be protected against market decline.

The removal of that certainty could have wider implications for:

• Commercial property valuations
• Investment appraisals
• Lending and refinancing discussions
• Institutional investment strategies
• Portfolio risk assessments

The commercial property sector has spent decades building valuation assumptions around the concept of protected rental growth. This legislation introduces the possibility of rental decreases in circumstances where market conditions deteriorate.

As a result, investors may increasingly focus on alternative methods of protecting returns, including higher initial rents, shorter lease lengths, stronger tenant covenants and revised rent review structures.

The overlooked issue: the retrospective element

One of the most significant  and potentially misunderstood  aspects of the legislation is its limited retrospective effect.

Although the ban is not expected to come into force until 2027, Parliament introduced provisions affecting certain renewal arrangements entered on or after 17 March 2026. This means that some agreements already being negotiated today could ultimately be impacted when the legislation is implemented.

In practice, landlords and agents should carefully review:

• Options to renew contained within existing leases
• Agreements for lease
• Pending lease renewals
• Asset management strategies involving lease re-gears or extensions
• Heads of terms currently under negotiation

For many property owners, the greatest risk may not lie in future transactions but in arrangements that have already been entered into and may become affected by the new regime once commencement regulations are introduced.

Could this reshape the high street?

The Government's rationale appears linked to wider economic and community objectives.

The Act itself is largely focused on devolution, local growth and community empowerment. Included within those objectives is a desire to support business occupiers and encourage more sustainable high streets by allowing rents to respond to changing market conditions. [gov.uk]

Supporters argue that more flexible rent review provisions could:

• Improve business resilience during economic downturns
• Encourage occupation of vacant premises
• Support independent retailers
• Strengthen local high streets and town centres [gov.uk]

Critics, however, suggest the policy could increase investment risk and lead landlords to seek alternative protections elsewhere within lease negotiations. Whether the reform genuinely improves affordability for occupiers or simply shifts risk to other commercial terms remains to be seen.

What should landlords and agents do now?

While implementation remains some distance away, the direction of travel is clear.

Commercial landlords and property professionals should consider taking proactive steps now, including:

1. Review existing portfolios

Identify leases with upcoming reviews, break options, renewals or re-gears that may be affected by the new framework.

2. Audit precedent documentation

Review standard heads of terms, agreements for lease and lease precedents to understand where updates may be required.

3. Stress-test asset performance

Consider how downward rent movements could affect portfolio values, yields and lender requirements.

4. Reassess negotiation strategies

Alternative rent review provisions may become increasingly important as the market adjusts.

5. Monitor implementation guidance

Several areas of the legislation remain subject to future regulations and guidance, including practical operation of certain review mechanisms.

Key takeaways

The ban on upwards-only rent reviews may ultimately become one of the most significant commercial property reforms of the last generation.

While introduced through legislation primarily focused on devolution and community empowerment, its impact is likely to extend far beyond local government reform. Landlords, investors, developers and agents should begin preparing now for a market in which rental income may no longer be assumed to move in only one direction. [gov.uk], [bills.parliament.uk]

With a limited retrospective element already affecting certain renewal arrangements entered into after 17 March 2026, understanding the implications of the legislation today could help avoid costly surprises tomorrow.

Need advice on commercial property matters?

The commercial property landscape is evolving rapidly. Whether you are a landlord, investor, developer, managing agent or occupier, obtaining early legal advice can help you protect your interests and plan strategically for future change.

Eaton Smith's Award Winning Commercial Property team advises clients across all aspects of commercial leasing, acquisitions, disposals, development projects and portfolio management.

If you would like to discuss how the English Devolution and Community Empowerment Act 2026 could affect your commercial property interests, contact Eaton Smith today for practical, commercially focused legal advice tailored to your business.