I’ve been watching the UK commercial property market for years, and one pattern keeps coming up: businesses sign leases without fully understanding the legal framework they’re stepping into. A recent report from Savills shows that regional office investment volumes reached £3.6 billion in 2025, a 23% increase on the previous year. That kind of activity means thousands of businesses are entering new lease agreements right now, many without realising how much the rules are about to change. What I want to do here is walk you through the institutional lease structures that underpin most UK commercial spaces, and explain what the upcoming reforms mean for your bottom line.
These figures tell a clear story: the market is moving, and leases are being signed at pace. But the legal landscape underneath those leases is shifting too. The government’s English Devolution and Community Empowerment Bill, published in July 2025, proposes banning upwards-only rent reviews in new and renewal commercial leases. That’s a fundamental change to how rent is calculated, and it could become law as early as late 2026 or 2027. If you’re negotiating a lease right now, you need to understand what you’re signing up for — and what might change before your next rent review. Here’s what you actually need to know.
If you’re trying to decide between different types of workspace, it’s worth reading about whether co-working is the right fit for your business — the flexibility might suit some tenants better than a long institutional lease. And if you’re dealing with a dispute or need clarity on a specific clause, speaking to a tenant landlord lawyer can save you from costly misunderstandings.
What an institutional lease actually is
Most people assume a lease is just a lease — you pay rent, you get space, end of story. But institutional leases are a different animal. They’re the standard form contracts used by pension funds, insurance companies, and large property companies when they let commercial space. These leases are heavily weighted in favour of the landlord, and they come with provisions that can catch small businesses off guard. The most important thing to understand is that an institutional lease typically includes an upwards-only rent review clause, meaning your rent can only ever go up or stay the same — it can never fall, even if the market drops.
That’s the kind of clause the government now wants to ban. The English Devolution and Community Empowerment Bill, if passed, would make upwards-only rent reviews unenforceable in new and renewal commercial leases. That’s a huge shift. But it’s not law yet — the Bill is still at committee stage in the House of Lords, and it could be late 2026 or 2027 before it takes effect. In the meantime, if you’re signing a lease, you’re still bound by whatever rent review clause is in it. My advice: if you’re negotiating a new lease right now, try to get a clause that says rent can go down as well as up. Landlords may resist, but it’s worth asking, especially given the direction the law is heading.
Why the upcoming reforms matter for your business
The changes coming down the line aren’t just technical legal tweaks — they’ll directly affect how much you pay and how much control you have over your space. Take the proposed ban on upwards-only rent reviews. Under the current system, if the market drops by 20%, your rent stays exactly where it is. That’s a real cost. The Savills data shows that European office demand held steady in 2025 with vacancies at 9%, meaning there’s plenty of empty space. In a falling market, an upwards-only clause protects the landlord, not you. If the ban goes through, future tenants will be able to negotiate rent downwards when market conditions weaken — that’s a significant shift in bargaining power.
Then there’s the security of tenure reform. The Law Commission completed its phase 1 consultation in February 2025 and provisionally concluded that the minimum term for protected business tenancies should increase from six months to two years. What does that mean for you? If you’re in a short-term lease, you currently have the right to renew when it expires — that’s security of tenure. If the minimum term goes up to two years, very short lets won’t qualify for that protection. You could find yourself in a space for 18 months with no automatic right to stay. That’s a risk if you’re investing in fit-out or branding.
I’ve seen businesses get stuck in leases they can’t get out of because they didn’t understand the renewal terms. If you’re considering a short-term let, it’s worth reading up on how to negotiate a lease buyout for your business space — it’s better to know your exit options before you sign. And if you’re unsure about any clause, a property lawyer can review the lease and flag the risks.
Where businesses get caught out by institutional leases
The mistakes I see most often aren’t about the headline rent — they’re about the clauses buried in the small print. Here are the three that cause the most trouble.
Not understanding how service charges are calculated
The updated RICS Professional Standard on service charges in commercial property took effect on 31 December 2025. It’s compulsory for all RICS-accredited professionals, and while it doesn’t override your lease terms, it sets the benchmark for what’s reasonable. The problem is that many tenants never check their service charge invoices. They just pay them. A 2025 survey found that the new RICS code is a vital reference point for negotiations and dispute resolution, but you have to know it exists to use it. If your landlord is charging for items that aren’t in your lease — like major structural repairs or management fees that seem excessive — you can challenge them. The code gives you a framework to do that. Start by requesting a full breakdown of the service charge, then compare it against the RICS standard. If something doesn’t add up, raise it in writing.
Ignoring the security of tenure trap
Many small business owners don’t realise they can ‘contract out’ of security of tenure. That means they give up their right to renew the lease when it expires. Landlords often insist on this for short-term lets, and it’s perfectly legal. But the Law Commission has provisionally concluded that the current model for contracting out is the right one — so that’s not changing. What is changing is the minimum term. If the threshold rises to two years, a tenant on an 18-month contracted-out lease won’t have any right to stay. That’s a problem if you’ve built a customer base or fitted out the space. Before you sign, check whether the lease is contracted out. If it is, you need a clear plan for what happens when the term ends.
Overlooking the Assets of Community Value rules
This one is niche, but it matters if you’re in a pub, local shop, or community space. The English Devolution Bill proposes widening the definition of community value to include properties that contribute to a local community’s economic wellbeing. That means more properties could be listed as Assets of Community Value. If your space gets listed, a community group gets a ‘preferred buyer’ status — if they offer market value, the owner can’t sell to anyone else for up to 18 months. That could affect your lease if the landlord decides to sell. It’s not something most tenants think about, but it’s worth checking whether your building is listed or could be listed in the future. If it is, factor that into your long-term planning.
If you’re worried about any of these traps, it’s worth reading about commercial rent traps and how small UK businesses get stung — it covers the practical steps to avoid the most common pitfalls. And if you’re dealing with a service charge dispute, a tenant landlord lawyer can help you challenge unreasonable charges.
→ Scroll right to see all columns
| Reform | Current position | Proposed change | Timeline |
|---|---|---|---|
| Upwards-only rent reviews | Enforceable in most commercial leases | Prohibited in new and renewal leases | Late 2026/2027 if Bill passes |
| Security of tenure minimum term | Six months | Likely to increase to two years | Second consultation pending |
| Service charge standards | RICS code voluntary | Compulsory for RICS professionals | In effect from 31 Dec 2025 |
| Assets of Community Value | Social/leisure focus | Extended to economic wellbeing | Part of Bill, timeline uncertain |
How to navigate an institutional lease in 2026 and beyond
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The key to handling an institutional lease is knowing what to ask for before you sign. Here’s a practical guide to the most important actions you can take.
Negotiate the rent review clause now
Even though the ban on upwards-only rent reviews isn’t law yet, you can still negotiate. Ask for a clause that allows rent to go down as well as up. Landlords may push back, but the market is shifting — with European office vacancies at 9% and incentives tightening, landlords are more willing to compromise than they were a few years ago. If they refuse, ask for a cap on the increase — say, a maximum of 5% per review. That limits your downside if the market drops. Put everything in writing and make sure the clause is clear. If you’re unsure how to phrase it, a business lawyer can draft the language for you.
Check the service charge provisions against the new RICS code
The updated RICS code sets out what’s reasonable in terms of service charges. Your lease might say something different, but the code is the benchmark. Before you sign, ask the landlord for a sample service charge budget and compare it against the RICS standard. Look for items like management fees (typically 10-15% of the total cost), sinking funds for major repairs, and whether the landlord is allowed to charge for their own overheads. If something seems high, challenge it. After you move in, keep every service charge invoice and compare it to the budget. If the actual costs are significantly higher, you can request a formal review. The code gives you a route to do that.
Understand your security of tenure position
If the lease is for less than two years, ask whether it’s contracted out of the Landlord and Tenant Act 1954. If it is, you have no automatic right to renew. That’s fine if you’re only planning to be there for a short time, but if you’re investing in the space — fitting it out, branding it, building a customer base — you need certainty. Ask for a renewal option in the lease itself. That gives you a contractual right to stay, even if the statutory protection doesn’t apply. If the landlord won’t agree, factor that into your decision. You might be better off in a longer lease with proper protection.
If you’re thinking about assigning the lease later, it’s worth understanding your right to assign in the UK commercial leasing process — that can be a crucial exit route if your business needs change.
Plan for the Assets of Community Value changes
If your business is in a pub, local shop, community centre, or outdoor sports ground, the proposed changes to the ACV framework could affect you. The Bill introduces a new category of ‘sporting asset of community value’ for outdoor grounds with spectator accommodation, and these designations won’t expire — they stay on the register indefinitely. That means if your landlord wants to sell, a community group could block the sale for up to 18 months by offering market value. That uncertainty could affect your lease negotiations. Ask the landlord whether the property is listed or could be listed. If it is, consider a longer lease with break clauses so you’re not stuck if the ownership changes.
- 1Review the rent review clauseCheck whether it’s upwards-only. If it is, negotiate for a downward-only or capped clause. Use the proposed ban as leverage — landlords know the law is changing.
- 2Audit the service charge provisionsRequest a sample budget and compare it against the RICS code. Flag any items that seem unreasonable before you sign.
- 3Confirm your security of tenure statusAsk whether the lease is contracted out. If it is, negotiate a contractual renewal option to protect your investment.
- 4Check for ACV listingsSearch the local authority register to see if the property is listed as an Asset of Community Value. Factor that into your long-term planning.
Frequently asked questions about institutional leases
Can I break an institutional lease early? ▾
What happens if my landlord sells the building during my lease? ▾
Does the RICS service charge code apply to my lease? ▾
Will the ban on upwards-only rent reviews apply to existing leases? ▾
What’s the difference between a contracted-out and protected lease? ▾
Can I sublet space under an institutional lease? ▾
If you’re dealing with a complex lease and need professional advice, a real estate lawyer can review the terms and flag anything that could cause problems down the line.
The institutional lease landscape is changing faster than it has in decades. The proposed ban on upwards-only rent reviews, the tightening of security of tenure rules, and the expansion of community asset protections all point in one direction: tenants are getting more leverage. But that leverage only matters if you use it before you sign. My advice is simple: negotiate the rent review clause, audit the service charges, confirm your security of tenure, and check for ACV listings. Do that, and you’ll be in a much stronger position than most businesses. If this was useful, you might also want to read understanding service charge invoices for UK commercial rentals.
Sources and Further Reading
Expert tips for navigating service charges in UK commercial rentals — A practical guide to challenging unreasonable charges and using the RICS code to your advantage.
Understanding catchment areas when renting commercial space in the UK — How location data affects lease value and what to look for before you commit.
Commercial Research Hub. Savills, 2025.
UK Real Estate Sector 2026 and Beyond. Charles Russell Speechlys, 2026.
