Commercial property tenants are at risk of having higher rents if government proposals to abolish upward only rent reviews become law, research from Watling Real Estate has revealed.
Joint managing director Andrew Foster said the government should be wary of unintended consequences as landlords would react to secure their investments.
Foster said: “Landlords will seek to minimise the impact of any legislation change, and they may align rents with RPI or CPI at review, as standard practice.
“Upward only rent reviews have been commonplace for generations and provide a degree of security for investors that rents will not be reduced during the term of the lease.
“The government believes that abolishing upward only rent reviews could breathe life into the market, in particular the high street.”
RPI and CPI both outperforming rental growth for the key commercial sectors on a 20-year average.
Foster added: “The government should be careful of unintended consequences caused by the abolishment of upward only rent reviews as landlords will seek alternative rental mechanisms that could result in higher rents for tenants.
“Our research has shown that the landlord’s likely default of RPI increases at review could result in higher rents.”