Why banning upwards-only rent reviews could accelerate the UK's net zero ambitions

The UK government’s proposal to ban upwards-only rent reviews may look like it's just about rent, but its implications could go much further. Reforming this outdated mechanism could enable more sustainable, collaborative leasing practices, unlocking energy efficiency upgrades and helping the commercial property sector stay on track with net zero targets.

Landlords, who do not benefit from operational cost reductions often lack the commercial incentive to invest in retrofit measures, as rents under certain leases only go up, even if the building is inefficient or faces growing compliance risk. This process can artificially inflate rental value and mask early environmental and long-term value warning signs.  

The current status quo restricts tenants' willingness to co-fund improvements and sidelines tenant desire to embed green lease clauses to reduce risk from unforeseen consequences. This is problematic as properties fall behind tightening Energy Performance Certificate (EPC) and Minimum Energy Efficiency Standard (MEES) targets:

• minimum EPC ‘E’ for non-domestic buildings since 2018  
• likely EPC ‘C’ by 2027  
• EPC ‘B’ by 2030.

There is also a risk of Carbon Risk Real Estate Monitor (CRREM) misalignment such as exceeding carbon intensity thresholds beyond the assets Intergovernmental Panel on Climate Change (IPCC) science based 1.5°C trajectory.

In contrast, flexible leases that allow for rent adjustment up or down linked to landlord asset sustainability activities, or proposed upfront energy efficiency cost sharing could be used to align interests, allocate retrofit responsibilities, and incentivise action to allow for green premiums at rent review.  

The UK is not the first to engage in this route. Ireland banned upwards-only rent reviews in 2010. While this created more balanced negotiations, rental values have continued to reflect supply, demand, and asset quality. Energy efficient buildings may achieve a ‘green premium’, but this is driven by multi-national occupier and investor preference, rather than the rent review structure itself.

Beyond energy efficiency and carbon reduction, lease reforms also support climate adaptation helping to ensure progression towards buildings and tenant spaces becoming resilient considering changing environmental conditions as the UK faces more frequent heatwaves, flooding, and extreme weather. Landlords and tenants must collaborate on upgrades that improve building fabric, ventilation, and systems durability to address this climate risk.

This holistic approach aligns with CRREM’s broader remit to future-proof portfolios, helping commercial property withstand physical climate risks while meeting net zero obligations.

Whilst the Bill is due its second reading in Parliament soon (early September), early action is recommended:

• review standard lease clauses in line with Better Buildings Partnership (BBP) model lease clauses for any new lease events  
• audit EPCs and assess CRREM pathways.

These actions not only support the UK’s net zero goals but protect asset value, leading the way toward sustainable, net contributing property portfolios.