Mark Plewes, Head of Pensions Technical at WBR Group goes into the details of what the latest reform means for landlords and pension‑held commercial property.
For decades, upward‑only rent review clauses have been a defining feature of UK commercial property leases.
They provided landlords and investors with a simple proposition: periodic rental growth, or at least income stability, regardless of wider market conditions. That assumption is now under serious threat.
What is changing?
The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026.
This passes into law a proposal first made in July 2025 to ban upward‑only rent review clauses in new commercial leases and renewals in England and Wales.
Although the proposed commencement date is not yet known this change marks one of the most significant structural shifts in the commercial leasing market in a generation.
Framed politically as tenant‑friendly reform, the implications for landlords, particularly those holding property through UK registered pension schemes such as SSAS and SIPP, are potentially far‑reaching.
The legislation prevents rent review mechanisms that allow rent to rise or stay the same under a lease, but never fall, where the future rent is not fixed or determinable at the outset.
This captures, amongst other things, familiar rent review formats such as open market reviews which until now have been a common feature of commercial property leases.
The ban will not be limited to leases which have the benefit of security of tenure under the 1954 Act; but instead applies to all agreements and across all commercial rental sectors.
Genuinely upwards‑and‑downwards reviews would remain permissible, as would fixed or stepped rents where the rental profile is known from day one.
Importantly, the legislation comes with broad anti‑avoidance provisions designed to prevent landlords achieving an upward‑only effect by alternative drafting means.
Although existing leases are preserved, a limited retrospective reach has been introduced by amendments to the Bill as it passed through Parliament.
This means some renewal options agreed on or after 17 March 2026 could be caught when exercised, even if the original lease predates the ban.
This has already injected uncertainty into ongoing transactions and heightened the need to forward plan.
Trustees with commercial property arrangements would do well to review arrangements for any leases that have expired (or are due to expire) if the intent is to renew, so as to able to continue to benefit from upward only rent reviews.
The likely market response will not be subtle. With long‑term income certainty eroded, landlords may increasingly favour shorter lease lengths, allowing rents to be reset more frequently to prevailing market levels rather than relying on periodic formula‑based reviews.
There also appears to be a growing consensus that landlords will lean more heavily on fixed or stepped rent structures, which remain outside the scope of the ban.
While these provide certainty for landlords, they also shift economic risk onto tenants, particularly in inflationary or economically volatile environments, and may impact affordability and covenant resilience over time.
Against this backdrop of speculation around how landlords will react, it remains to be seen whether the scope for innovation may be more constrained than expected once anti‑avoidance rules and forthcoming guidance are fully tested in practice.
Why this matters for pension‑held property
For pension funds and SSAS in particular, where a significant number of commercial properties are held, the proposed reforms strike at the heart of why commercial property has traditionally been attractive as a scheme investment.
Long leases with upward‑only rent reviews have historically aligned well with trustees’ duties and planning for members’ needs.
They delivered predictable income, supported property valuations and helped match long‑term pension planning aims whilst reducing volatility in what is often considered to be a worthwhile, but relatively illiquid asset class.
The removal of that asymmetry, where rent can now move down as well as up, introduces a new layer of volatility into pension scheme cash‑flow and valuation planning at a time when other changes, including those in relation to Inheritance Tax (IHT) are also creating uncertainty.
Trustees and advisers may therefore need to reassess several established assumptions, including:
- Preferred lease length for new acquisitions or lease renewals
- Valuation sensitivity, particularly for schemes approaching benefit crystallisation, dealing with death benefit distribution, or winding up
For SSAS with borrowing arrangements secured against property, the implications could extend further.
Lenders have historically taken comfort from upward‑only rent reviews when assessing serviceability and covenant risk.
Reduced certainty may feed through into loan terms, pricing or appetite, particularly where leverage is already a point of scrutiny.
While commercial property remains attractive for pension schemes, the reforms do signal a shift from relative income security towards more active asset and lease management.
Trustees should expect greater scrutiny of lease terms at acquisition stage, more frequent engagement with letting agents and valuers, and closer alignment between property strategy and the scheme’s broader funding and liquidity objectives.
Decisions around rent review structures, lease renewals and tenant negotiations will need to be clearly documented, particularly where trustees are balancing income stability against long‑term capital considerations.
One thing is for sure and that is that these changes reflect a broader political and economic recalibration in how risk is shared between landlords and tenants.
For landlords, and especially for those holding commercial property within pension structures, the message is clear: historic certainties can no longer be assumed.
Early engagement with legal, valuation and pensions advisers will be essential to ensure future leases remain investable, compliant and aligned with long‑term scheme objectives as the new landscape takes shape.
Main image: commercial property, nastuh-abootalebi-yWwob8kwOCk-unsplash
