Rent reviews are a well-established feature of commercial leases, allowing landlords to adjust rent payments to match market rates and inflation. In Scotland, these reviews tend to occur every three to five years and feature ‘upwards-only’ clauses, meaning rents cannot be decreased (i.e. the rent can stay the same or it will increase). Until recently, this was also the case in England and Wales. However, the new English Devolution and Community Empowerment Act 2026 (2026 Act) is making waves in an attempt to change this.
What is changing with upwards-only rent reviews in England and Wales?
Receiving Royal Assent in April 2026, the 2026 Act amends the Landlord and Tenant Act 1954 (1954 Act) by introducing new provisions to the 1954 Act governing the operation of rent review clauses in commercial leases in England and Wales. The reforms, albeit currently not in force, will bring an end to upwards-only rent review clauses in commercial leases in England and Wales (including leases renewed under the 1954 Act), aiming to support small businesses by reducing costs and tackling inefficiencies within the market. This means that rents will reflect improving or worsening market conditions, aiming to provide a fairer rental approach. This sentiment is echoed by the UK Government, which has suggested that the removal of upwards-only rent review clauses will reflect market changes and encourage the revival of empty high streets and town centres.
Although the 2026 Act applies only in England and Wales, it is likely to influence the Scottish commercial property market. The key question, however, is what these changes could mean for Scottish landlords and tenants alike.
What could the changes mean for commercial tenants in Scotland?
From a tenant perspective, the 2026 Act could act as a catalyst for change within the Scottish commercial leasing market. We may begin to see growing support for the removal of upwards-only rent review clauses among tenants, in a bid to align Scottish commercial leases more closely with those south of the border. Set against a backdrop of declining high street occupancy and retail closures driven in part by increasing rental costs, rent review provisions that respond to fluctuating market conditions could create a more balanced relationship between landlords and tenants.
Tenants may also begin to push for more frequent rent renegotiations and regears to ensure rents remain aligned with market conditions. As a result, this could lead to a decline in the use of upwards-only rent review clauses in Scottish commercial leases.
What could the changes mean for commercial landlords in Scotland?
From a landlord’s standpoint, following the introduction of the 2026 Act in England and Wales, we could see a greater move towards shorter-term leases with fixed increases or indexation to help protect landlord rental income. This would allow rents to increase over time without the need for formal rent reviews.
Landlords may also begin to seek higher initial rents on shorter-term leases to try to achieve a financial position comparable to that previously secured through upwards-only rent review clauses. This would help guard against potential losses arising from rent review clauses that allow rents to fluctuate in line with the market.
Stepped rent clauses in commercial leases could also become more popular with landlords. These clauses provide for pre-agreed incremental rent increases at specific and pre-determined dates rather than a reliance on future market valuations. Stepped rent clauses provide landlords and tenants alike with certainty and clarity from the outset, which may be regarded as a fairer and more transparent approach than standard upwards-only rent reviews.
Could Scotland follow England and Wales on rent reviews?
While the 2026 Act applies only in England and Wales, its effects are likely to be felt across the Scottish commercial property market. The end of upwards-only rent reviews may encourage commercial tenants in Scotland to seek greater flexibility and rents which more accurately reflect market conditions. In response, landlords might look to alternative mechanisms, such as higher initial rents or increasing the use of stepped rental provisions, in an attempt to protect their investment.
Although it remains to be seen whether similar reforms will be introduced in Scotland, the 2026 Act has already ignited debate around the fairness and effectiveness of traditional rent review provisions and will undoubtedly influence the future direction of the Scottish commercial leasing market.
If you are a landlord or tenant considering how rent review provisions could affect your commercial lease, our Commercial Property team can provide advice on your options. Get in touch to discuss your lease and the approach that may be right for you.
