Breaking the Ratchet: Assessing the Proposed Ban on Upwards-Only Rent Reviews
The UK government has introduced the English Devolution and Community Empowerment Bill, which proposes a ban on ratchet clauses—provisions that stipulate upwards-only rent reviews—in new commercial leases in England and Wales. This marks a significant shift in the landlord-tenant dynamic, aiming to provide greater balance for occupiers while reshaping income security for landlords and investors. In this report, KBRA explores the bill’s potential impact as lease cash flows and rent review provisions play a central role in income stability and asset valuations.
Key Takeaways
The bill proposes to prohibit upwards-only rent reviews in all new commercial leases in England and Wales, marking a major shift in landlord-tenant dynamics.
Fixed stepped increases remain allowed, and index-linked or market rent reviews will be permissible only if they allow rents to adjust both upwards and downwards, without a floor. Caps are expected to be permitted (subject to regulations) and…
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