How the proposed ban on upwards only rent reviews could impact commercial leases in Scotland

The UK Government has proposed including a ban in the English Devolution and Community Empowerment Bill (the “Bill”) on upwards only rent reviews for new commercial leases in England and Wales.

This would create a divergence from the position in Scotland, where there is no equivalent to the Landlord and Tenant Acts, and the law on leasing is more heavily based on common law. While the Scottish Government is considering lease reform generally, and has published its own proposals, this is primarily focussed on other areas such as ‘tacit relocation’ (the Scots law doctrine under which leases automatically continue beyond their expiry dates unless the landlord or tenant serves a notice to quit). However, despite apparent progress on the Leases (Automatic Continuation etc.) Bill, it was announced on 10 September 2025 that this has now been withdrawn, which could pave the way for reform in other areas, including rent reviews.

Key differences in the Scottish and English property markets

There are already key differences between Scotland and England that affect the property investment markets, such as Land and Buildings Transaction Tax, which applies in Scotland in place of Stamp Duty Land Tax south of the border. Introducing more differentials between the markets could impact external investors’ decisions, particularly where portfolios span the UK.

Upwards only rent reviews, whether based on market valuations or linked to inflationary increases, are the norm with Scottish retail leases in the same way they are elsewhere in the UK. This includes leases within shopping centres across Scotland – these will generally contain turnover rent provisions alongside upwards only rent review sections. As a result, it is reasonable to assume that if these are banned in England and Wales, then Scotland would likely follow suit.

Who will these changes impact?

It should be noted that the ban will not be retrospective, and only tenancies created after its implementation will be affected. The Bill contains anti-avoidance provisions, which prohibit parties from contracting out of the ban by way of a side agreement requiring commercial tenants to pay top-ups where rent has been reviewed downwards.

The Bill would also give tenants the right to trigger or operate a rent review, even in circumstances where the lease provides for that action to be taken by the landlord. This would prevent situations where landlords can refuse to trigger a rent review, instead resting on a higher rent if the market falls.

The ban will be of particular significance to retailers with UK-wide property investment portfolios. Overseas investors will also need to get to grips with the impact it could have on projected rental cashflows. There could be significant valuation consequences for landlords and investors as upwards only rent reviews provide rental growth in line with the market, and so a ban could affect property valuations and lending terms. If a ban did come into effect, it’s likely that lease structuring would focus on fixed or stepped rent increases, or lease terms could shorten leading to more frequent renegotiations on renewals.

To make up for any shortfall in terms of cash flow, landlords may look to set a higher base rent at lease commencement than they otherwise would have, which in turn may lead to tenants requesting additional incentives during negotiations (such as additional rent-free periods and break options).

How likely is it that this ban will come into law?

It should be noted that a consultation is scheduled for 2027/28, and with the initial responses to the proposals (both from the legal profession and the market) being negative, there is doubt as to whether these reforms will come into law.

The respective Governments are keen to drive new investment in UK real estate by institutional investors, but creating unpredictability around whether commercial rents will increase in line with market values and/or inflation may be seen to be counterproductive. Both landlords and tenants within the retail sector should keep a close eye on legislative developments in this area south of the border, and ensure that they’re prepared for similar changes to take effect in Scotland.

How we can help

If you have been affected by any of the issues raised in this article, you can contact us here or email Rory.Knox@andersonstrathern.co.uk.