English Devolution & Community Empowerment Bill — what it means for retail leases

The English Devolution and Community Empowerment Bill (the Bill) was introduced to Parliament on 10 July 2025 and represents a significant shift in the governance landscape across England — with particularly important implications for the retail sector and high street businesses. 

Building on the foundations laid by the English Devolution White Paper published in December 2024, the Bill is designed to transfer power from central government to local leaders, enabling more responsive and locally shaped decision-making. 

Here, Millie Pancholi from our property disputes and litigation team explores what the Bill means in practice and how its reforms may affect both retail tenants and landlords.

What’s changing?

According to government guidance, the Bill encompasses reforms across three broad categories — devolution, local government and communities. The community-focused elements of the Bill are particularly relevant to the retail sector as they aim to support high street regeneration through a variety of mechanisms. One of these is the enhancement of community powers to acquire assets of community value with the hope that community buyouts will stimulate renewed activity and investment in high street areas. 

Another key reform is the proposed reconstruction of commercial leasing practices, specifically the abolition of upward-only rent review (UORR) clauses in England and Wales. These clauses are widely viewed as contributing to market inefficiencies and inflated rents during economic downturns. The removal of UORRs intends to promote fairer rent dynamics and make it easier for small businesses to establish and sustain a presence on the high street.

Clause 72 & Schedule 31 

Clause 72 of the Bill serves as a technical provision introducing Schedule 31 which proposes two new schedules to the Landlord and Tenant Act 1954. 

These include: 

• Schedule 7A — introduces a statutory ban on UORR clauses.
• Schedule 7B — prohibits put option clauses that allow landlords to compel tenants to enter into new tenancies on predetermined terms. 

The proposed changes apply to both new and renewal leases, making any UORR clauses in such agreements unenforceable. However, the reforms won’t apply retrospectively, meaning that existing leases containing these clauses will remain unaffected.

UORR clauses have long been a feature of commercial leases. They’re usually structured so that, when the rent is reviewed, it becomes whichever is higher — the current market rent at the review date or the rent that the tenant is already paying. While this gives landlords certainty and investors predictability, it can leave tenants stuck paying rents that exceed the current market value of the property. This is especially damaging during periods of economic decline when market rents may fall but tenants remain bound by inflated lease rents.

When does the proposed prohibition apply? 

The proposed prohibition under Schedule 7A will apply only if four specific conditions are met:

1. Business tenancies

The tenancy must fall under Part 2 of the Landlord and Tenant Act 1954. In simple terms, this covers commercial leases lasting more than six months where the tenant uses the premises for business purposes. It also includes tenancies contracted out of the Act’s protections since Part 2 still applies in principle (the parties have just agreed to exclude it). Under the Bill, the Secretary of State will retain the power to grant exemptions through future regulations.

2. Granted post-Schedule 7A enforcement

The tenancy must be granted after Schedule 7A comes into force and mustn’t be pursuant to a pre-commencement contract. While the prohibition won’t have retrospective effect, Schedule 7B will prevent landlords from requiring tenants to accept renewal leases with rent fixed by reference to the existing lease on an upward-only basis.

3. Relevant rent review

The tenancy must contain rent review terms where the rent will or may change during the term and the amount of change isn’t known or fixed at the start. This condition captures a wide range of rent review mechanisms, including open market rent reviews, index-linked reviews and turnover-based rent provisions. Fixed-step rents are excluded from the prohibition as the rent changes are predetermined and ascertainable from the outset.

4. Dual-element

The method for determining the new rent must involve two elements. The first is the calculation of a ‘reference amount’ that may be based on inflation, an index, a multiplier or turnover. The second is that the new passing rent differs from the reference amount. If the reference amount is lower than the current rent, the reviewed rent must be reduced accordingly. The Bill also includes anti-avoidance provisions to prevent landlords from using creative lease structures or wording to bypass the ban on UORR clauses.

What does this mean in practice for both retail tenants & landlords? 

Although the reforms apply to all commercial leases, they’re especially important for the retail sector and high street businesses. The government’s objective is to reduce vacancy rates and encourage new retail activity by making leasing more accessible and sustainable. One potential outcome is a shift towards shorter lease terms — for example, five-year agreements — which may not include rent reviews and could therefore fall outside the scope of the prohibition. This may create a mismatch between existing headleases and future subleases, particularly where the former contain UORR clauses and the latter don’t.

For tenants, the reforms promise fairer rent adjustments that reflect market conditions, inflation or turnover. This could improve business viability — especially for smaller and independent retailers — and encourage the use of vacant units. However, there’s a possibility that landlords may respond by setting higher initial rents or opting for stepped rent structures to manage risk.

For landlords, the reforms present challenges in terms of reduced income certainty and potential investment instability. The anti-avoidance provisions further limit flexibility in lease and rent structuring. Nevertheless, landlords may still use stepped rents with pre-agreed increases and rent caps and collars (setting minimum and maximum rent thresholds) may remain permissible.

What’s next? 

It’s anticipated that the commercial property sector will lobby against the reforms, citing concerns about investor confidence and the loss of guaranteed minimum rental income. Some criticism has already emerged, suggesting that the proposals could undermine the stability of the leasing market. Despite this, the Bill passed its second reading in the House of Commons on 2 September 2025, with 365 MPs voting in favour and 164 against. 

During the report stage, the House of Commons debated the ban on UORRs. Amendments have been suggested to introduce provisions enabling tenants to initiate rent reviews, ensuring that landlords can’t avoid rent reviews during times of rental decline. The Bill has now reached the House of Lords and further updates will follow.

Talk to us

Our property disputes and litigation team, together with our retail sector specialists, can guide you through how these reforms may affect your lease arrangements. We offer straightforward, tailored advice for both landlords and tenants, helping you to manage risk, resolve disputes and confidently adjust to the new leasing framework.

Talk to us by giving us a call on 0333 004 4488, sending us an email at hello@brabners.com or completing our contact form below.