With many occupier businesses just getting their heads around the complex rating reform that made up the Chancellor’s Autumn Budget, 2026 promises to be more fraught.
The verdict on the business rates position under the budget is that overall business rates will increase for the majority of businesses as reliefs are withdrawn. Particularly those with multiple or larger premises.
2026 promises even more changes ahead for property occupiers and owners. Below is a summary of the key changes with a prediction of likely outcomes.
Ban on Upward Only Rent Reviews
The Devolution Bill which is currently making its way through the House of Lords includes provision to ban upward only rent reviews to be contained in any new leases of business tenancies granted after the new law takes effect. Upwards only rent reviews have been the market norm since the 1950s and have helped provide certainty of income and investment return to the UK commercial property sector which has excelled and become one of the strongest performing investment markets internationally.
Banning upward only reviews whilst on the face of it being positive to tenants is seen by others such as the British Property Federation as a threat that could have negative effects for commercial property tenants including higher initial rental pricing, reduced incentives for tenant’s to lease new premises (e.g. via rent free periods) and landlords being much less willing to fund tenant’s capital fit out works. All of these elements are potentially very important to retail and corporate occupiers who appreciate being able to smooth out and rentalize some of the upfront investment cost required to mobilise new premises.
Experience from other jurisdictions that have brought in a similar ban has seen a reduction in average lease terms to below five years (which is the typical rent review trigger period) and potentially greater transactional costs as leases need to renewed more frequently
Irrespective of how the ban works out it will create a hiatus in the market as occupiers potentially hold out to see the effects of the new legislation in some cases before committing to take new premises. Existing leases may require renegotiation or variation e.g. some tenant’s may seek to take advantage of underletting provisions within existing leases which may be capable of being granted without upwards only rent reviews.
Our advice to all tenant occupiers is to track the implementation date for the new reforms and review their existing tenancy portfolio and plan strategies with regards to upcoming lease renewals and rent reviews as well as seeking opportunities to alleviate any potentially onerous rents for example by considering opportunities around subletting.
Abolition of Assured Shorthold Tenancies
Although this is a change affecting residential tenancies, it is another seismic change in the property market that may have material impact on commercial property occupiers. The abolition of assured shorthold tenancies and the greater rights being granted to remove no fault evictions as well as overhaul and greater regulation of the process for granting tenancies as well setting and reviewing rents and bringing tenancies to an end is going to impact all estates where there are mixed use premises. The new tenancy regime is going to be more costly to operate and administer in the face of additional regulation and the need for much greater engagement between landlords and the courts (first tier tribunal). Any additional costs are going to have to be met either via estate management charges or landlords and these costs are likely to have to be passed on to other scheme occupiers including commercial tenants. Landlords of mixed use buildings will also be much more constrained in their ability to deal with problematic residential occupiers (who either behave badly or fail to reliably pay their rents).
Our advice to tenant occupiers is to consider where they occupy mixed use premises and aim to establish what the likely impact of the new regime is going to be in terms of potential costs and compliance. There are compliance issues that need to be dealt with in fairly short order and where current difficulties already exist there remains a very short window to regularise issues before the new regime comes into law on the 1 May 2026. Separately, tenant occupiers may let out residential elements in their premises to employees or have been contemplating converting letting out residential elements within their commercial units e.g. upstairs flats. Such plans should be carefully reconsidered in light of the new legislation and steps taken quickly where necessary.
Leasehold and Commonhold Reform Bill 2025
The third big reform is the forthcoming legislation due to be introduced in parliament this month designed to abolish the creation of sale of new leasehold residential property. The legislation has been prompted by concerns around profiteering and unscrupulous practices by ground rent companies and certain managing agents. The new legislation is another change that the Property industry is watching carefully, with a number of high profile landlords having already mounted a legal challenge against the forthcoming changes.
The concerns for tenant occupiers again relate to how mixed use estates will be properly serviced and managed. Commonhold puts the initiative and potentially control back into the hands of residential occupiers. Whilst this can be a good thing it requires motivated occupiers who are able to get on between themselves as a residents collective and who are willing to step up and take on the responsibility of management. With the increasing burden and sophistication of regulation there are fewer suitable parties able or willing to take on these types of roles. Where mixed use estates and management companies fall into financial deficit, achieving a recovery can be very difficult if not impossible. Tenant occupiers face the unappealing prospect of common parts falling into disrepair and estate services being depleted.
Our advice to tenant occupiers is to assess where and how they may be impacted by commonhold reforms. A commonholder could become a significant contributor to the common estate or local environs or neighbourhood which supports the occupiers business tenancy.
