*A little-known clause in the Devolution Bill could bring big changes to rent reviews – with major consequences for landlords, tenants, and investors across the UK.*
Buried in the English Devolution and Community Empowerment Bill — a piece of legislation largely focused on regional governance — is a clause that has sent ripples through the commercial real estate legal community: a proposed ban on the inclusion of upward-only rent review clauses (UORRs) in new commercial leases.
For decades, UORRs have been a cornerstone of UK leasing practice, offering landlords income stability and underpinning investment yields. Their potential removal, which has not been publicly consulted on, represents a fundamental shift in the landlord-tenant relationship and raises serious questions for asset valuation, investor confidence, and leasing strategy not only here in the North-West but across the country.
How would it work?
If passed in its current form, the Bill would prohibit the use of UORRs in any new lease granted after the commencement date. Rent reviews would instead need to reflect open market levels or be index-linked in a way that allows for both upward and downward movement.
Importantly, this would also apply to lease renewals under the Landlord and Tenant Act 1954. So, even if a lease originally contained an upward-only clause, any new lease granted following a statutory renewal would need to comply with the new regime.
The proposed legislation contains anti-avoidance language that would void any clause seeking to replicate a UORR in disguise. This makes it significantly more than a technical adjustment — it would be a structural change to the way commercial leases are negotiated and valued.
Why now?
The rationale is framed around supporting local economies and small businesses, particularly on high streets. Allowing rent to fall in line with market conditions is seen as a way to reduce vacancies, promote flexibility, and stimulate local enterprise.
However, critics argue that removing UORRs could reduce the attractiveness of UK commercial property to investors and pension funds — groups that favour predictability and inflation-linked income. There is concern that this could dampen development appetite, especially for speculative schemes, and lead to more cautious lending criteria from funders.
Implications for the North-West
In a regional market like Manchester — where landlords and occupiers are increasingly engaged in complex, mixed-use retail and logistics-driven developments that have attracted major international investment — the proposed change could significantly alter leasing strategy and shift the balance of power in leasing transactions.
Landlords may need to consider alternative mechanisms, such as fixed uplifts, capped and collared indexation, or hybrid turnover rents, to maintain financial predictability. For tenants, the shift offers potential leverage — especially in sectors or locations facing rental pressure.
What could this mean in practice?
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Valuations & yields: Loss of the rent “ratchet” may widen North-West prime yields as investors price in downside risk.
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Negotiations: Expect longer heads‑of‑terms as parties model CPI‑linked collars, turnover rents or stepped uplifts to share risk.
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Shorter Leases: Expect an increase in shorter term leases being negotiated without rent reviews.
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Inflated Rents: It is likely that in practice new leases may be negotiated at a slightly inflated rent in the first place to counter act the long-term difficulties, especially in prime and eagerly fought for properties.
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Development funding: Forward‑fund deals may require new covenants or shorter review cycles to keep lenders comfortable.
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Investor appetite: International funds attracted by the UK’s “bond‑like” income could look to jurisdictions where rent regulation feels less political.
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High‑street recovery: Government hopes flexible rents will speed re‑lettings and reduce voids – welcome news for secondary retail in Manchester, Liverpool and Chester
At Clyde & Co LLP in Manchester, our commercial real estate team is already advising clients on pre-emptive steps. These include:
– Accelerating deals to preserve UORRs while still permissible
– Reviewing lease portfolios for renewal risks
– Stress-testing asset values under dual-directional rent assumptions
Whether or not the Bill passes in its current form, the policy direction is clear. The government is willing to challenge longstanding market norms in pursuit of flexibility and perceived fairness. For stakeholders in the North-West property market, now is the time to re-evaluate leasing assumptions — before legislation makes the choice for them.