The elimination of upward-only rent reviews could damage the economy, Gavin Whitney, partner at UK law firm Fladgate, has warned.
Banning the clause could undermine commercial property values, reducing returns for owners and pension funds, as well as lowering government income via capital gains taxes and stamp duty receipts, Whitney warned.
The proposed change was introduced as part of the English Devolution and Community Empowerment Bill.
Whitney said: “Upward-only rent reviews (UORRs) are a standard feature of almost every commercial lease, providing property investors with predictable income streams that underpin mortgage borrowing and long-term investment strategies and protect against inflation.
“This proposed ban risks inflicting severe unintended damage on the broader economy, which is already under strain. By undermining property values, it could reduce returns for everyday property owners and pension funds alike, leaving many worse off, including the government itself through lower capital gains tax and stamp duty land tax receipts.
“Although UORRs have their critics, the market has shown, particularly during COVID, that it can adjust when rising rents conflict with declining tenant incomes. Implementing a broad legislative ban now feels excessive. It seems the government is quickly adopting populist measures, but it’s essential to consider how these actions might affect everyone.
“We hope the government widely consults on this proposal to consider all viewpoints, as further damage to UK plc at a time when the country can least afford it should be avoided.”