Ban on upwards only rent reviews edges closer and broadens scope

The Committee Stage yielded some significant refinements to the proposed ban on upwards only rent reviews (UORRs) for business tenancies contained in the English Devolution and Community Empowerment Bill. 

Most notably, although existing tenancies are not caught by the ban, there are new and significant restrictions on how underletting clauses in existing leases will operate. Any terms in an existing lease that would compel the inclusion of UORR clauses in underleases will not be effective and, if such a UORR requirement is present, the landlord also appears to also lose all control of any other requirements relating to rent review terms on underletting (even those that do not involve any UORR provision, such as a specification that reviews in the underlease must be on the same dates as those in the headlease). 

This is because the Bill states that, if an existing lease would require the inclusion of an UORR clause in an underlease, the superior lease will have effect as if it requires or permits the underlease to include rent review terms of any kind agreed by the parties to the underlease, and the superior landlord will have no say in the rent review terms which are included. This may represent a significant incentive for landlords to vary their existing leases (many of which will require UORR clauses in underleases) to exclude any offending UORR requirement on underletting before the Bill becomes law, in order to safeguard other controls on rent review terms in underleases. 

There are also changes to the scope of tenancies caught by the ban. A tenancy is caught if Part 2 of the Landlord and Tenant Act 1954 (the “Act”) either applies to it or would apply to it if the tenant were in occupation for business purposes and the terms of the tenancy permit such occupation. This is intended to address an anomaly in the original Bill, whereby a tenancy would fall outside the scope of the new regulations if the tenant had sublet the whole of the premises. 

The Bill remains forward-looking: UORR terms in existing tenancies will not be affected. However, tenancies varied after the Bill becomes law to include rent review terms are now expressly caught. 

In parallel, the scope of prohibitions on UORR terms in agreements for renewal tenancies is widened so that it covers any “tenancy renewal arrangement”, and not just “put options”. The ban on UORR terms applies to agreements where the tenant can require the landlord or another person to grant a new tenancy and not just where the tenant can be required to take a new tenancy.

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The Bill will now progress to the report stage and third reading, which are scheduled over two days on Monday 24 and Tuesday 25 November, where further amendments will be possible. 

The Public Bill Committee has now completed its work and has reported the Bill with amendments to the House, and is no longer able to receive written evidence.

https://bills.parliament.uk/bills/4002/news