The End of Upward Only Rent Reviews? Legal Insights SMEs Need for 2026 Lease Negotiations

As we move through the first quarter of 2026, many SMEs are already turning their attention to lease renewals and new premises. Market confidence is improving in some sectors, but margins remain tight for many businesses across the region. Against that backdrop, one question has become a recurring theme in early year discussions: are upward only rent reviews finally reaching the end of the road?
It is a fair question. For years, these clauses have been a point of frustration for tenants. They allow rent to rise or remain the same but never fall, even where local market rents have declined. With economic conditions still unpredictable, the traditional structure feels increasingly out of step with the way many SMEs now operate.
Although upward only reviews remain lawful and common, there is growing movement in the market and more room than ever for negotiation. Below, I share the key insights and trends we are discussing with clients as they prepare for 2026 lease negotiations.

Why Upward Only Reviews Still Dominate

Despite the growing debate around fairness, upward only rent reviews have not disappeared. They remain the default approach in many professionally drafted commercial leases.

There are two main reasons for this:

1. Asset valuation.
   Landlords, particularly those with investment portfolios, depend on predictable income. Allowing rent to reduce mid term can have a direct impact on property values and lending arrangements.
2. Market convention.
   Because the clause has been the norm for decades, it often appears without question in standard lease templates. Many landlords include it because they always have, rather than because they are resistant to alternatives.

That said, convention is not the same as obligation. There is no legal requirement to adopt upward only reviews, and 2026 is shaping up to be a year in which SMEs have more leverage to request different structures.

Early Signs Suggest a Shift in Power for Tenants

Although upward only reviews are still widespread, the market conditions that once made them almost inevitable have changed. Several factors are influencing negotiations this year.

A more cautious lending environment.
Landlords are under pressure from higher financing costs. A vacant unit can be more damaging than a flexible rent review clause, which means tenant retention is becoming a priority.

Regional variations in demand.
Across parts of Hertfordshire, Bedfordshire and Buckinghamshire, availability of office and retail units has increased. With more choice, tenants can afford to be selective.

A focus on sustainable occupancy.
Landlords who value long term tenants are increasingly open to concessions that support business stability.

These factors are encouraging a gradual but noticeable shift in how rent reviews are agreed. There is also a potential legislative shift on the horizon: the Government’s English Devolution and Community Empowerment Bill (introduced in July 2025) proposes banning upward‑only rent review clauses in new and renewed commercial leases, though existing leases would remain unaffected. The Bill is still progressing through Parliament and commencement dates have not yet been confirmed.

Alternatives That SMEs Are Successfully Negotiating

We are seeing more tenants secure alternatives that strike a fairer balance between risk and stability. The main options include:

True Open Market Rent Reviews
This is closest to the traditional structure but crucially allows rent to move down as well as up. An independent valuation assesses market rent at the review date. While still requiring careful drafting, it is often the most straightforward alternative.

Cap and Collar Arrangements
This approach sets a maximum and minimum level for any increase or decrease. The corridor protects both parties and gives SMEs clearer budgeting boundaries.

Fixed or Stepped Increases
Instead of linking rent to market movements, the lease sets out modest, scheduled increases at predictable intervals. Many tenants prefer this for long term planning.

Turnover Linked Rents
Most common in hospitality and retail, these allow rent to fluctuate with actual performance. For businesses recovering after the challenges of recent years, this can provide welcome flexibility.

Hybrid Models
Some tenants agree a combination, such as a fixed uplift for the first half of the term followed by a market review later. These structures can work well where landlords are concerned about future market uncertainty.

Why Early Legal Advice Matters

In the current climate, it is not just whether a rent review is upward only that matters. The detail of the drafting can have a significant financial impact. We regularly review clauses where assumptions or definitions quietly shift the balance in the landlord’s favour.

Key points to look out for include:

• How market rent is defined.
  Some definitions assume a fully repaired and modernised property, even if the building in question has clear limitations. This can inflate the final figure.
• Assumptions and disregards.
  These are often technical but extremely important. They may require the valuer to ignore certain tenant improvements or assume the premises are vacant and available to let.
• The valuation process.
  If the parties cannot agree, how is the dispute resolved and who pays? Many tenants do not realise that valuation fees can fall to them if the lease is not balanced correctly.
• Timing of the review.
  In sectors with seasonal fluctuations, the chosen review date can materially affect the outcome.

Understanding these points early allows SMEs to negotiate from a position of clarity rather than reacting once the lease is already in place.

Practical Tips for SMEs Preparing for 2026 Negotiations

If your business is approaching a lease renewal or considering new premises this year, the following steps can help create a stronger negotiating position.

1. Review the Current Lease Well in Advance
   Too many tenants look at the rent review clause only when the reminder letter arrives. Early preparation gives you more space to propose alternatives.
2. Take a Realistic View of Local Market Conditions
   This is not about finding the cheapest options but understanding what similar properties are achieving. Evidence supports negotiation power.
3. Run Financial Models
   Understanding the cost implications of different rent review structures over the entire term can be eye opening. What looks reasonable on paper may create significant strain three or four years later.
4. Be Open About Your Priorities
   A landlord may be more flexible than expected if they understand your long-term plans and commitment to the property.
5. Get Legal Input Before Heads of Terms
   Many tenants involve solicitors only when the lease arrives. By then, key commercial points are already agreed. Early advice can prevent awkward renegotiations later.

Final Thoughts

Upward only rent reviews are not disappearing overnight, but 2026 is emerging as a year in which tenants have more influence over the way their leases are structured. The earlier SMEs prepare, the better their chances of securing a rent review mechanism that supports stability and growth.

If you are approaching a lease renewal or planning ahead for your next commercial premises, our Commercial Property team can guide you through the process and help you understand your options. You can find more information on how we support businesses with lease renewals here.

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