Update: Upwards Only Rent Review Ban Receives Royal Assent

The committee stage introduced significant amendments which impact how the ban will operate in practice. Here are the crucial updates since our previous blog.  

Scope of the ban

As originally drafted, the ban only applied to leases covered by Part II of the Landlord and Tenant Act 1954 (“the 1954 Act”).

As a result, the ban did not apply to tenants not in occupation, whether because they had not yet occupied, had vacated early, or sublet the whole of the property.

The amended Bill now specifies that tenants with a contractual right to occupy a premises for business purposes, to which Part II of the 1954 Act would apply if the tenant were in occupation, will be within the scope of the ban, even if they are not in actual occupation.

The Bill also bans UORR clauses from being subsequently introduced into existing leases by varying leases that were originally drafted to be compliant.

Originally, the Bill only considered lease terms at the time they were originally granted, creating a loophole, which has now been closed.

Letting agreements

Previously, the Bill banned agreements for lease and “put” options (options where a landlord can require that that a tenant takes a lease) from including day-one UORR clauses.

The amendments to the Bill brought “call” options (options where a tenant can require that the landlord grants a lease) within the scope of the ban.

This ensures that UORR clauses cannot be reintroduced through option arrangements.

Superior leases

Any provision in a superior lease requiring an underlease to contain a UORR will be ineffective.

Additionally, where a superior lease mandates that underleases contain a UORR clause, landlords will effectively lose control over rent review terms in underleases.

In such cases, the superior lease will instead operate as if it permits the inclusion of any rent review terms agreed between the parties to the underlease, i.e., between the tenant and the undertenant.