Paragraph 2 New Schedules 7A and 7BI1

Before Schedule 8 of the Landlord and Tenant Act 1954 insert—

“Schedule 7A

Rent reviews

Section 54A

Part 1

Key terms

“Business tenancy”

1

(1)

A tenancy is a “business tenancy” at a particular time if, at that time, Part 2 of this Act—

(a)

applies to the tenancy, or

(b)

has the potential to apply to the tenancy.

(2)

For that purpose, Part 2 has the potential to apply to the tenancy at a particular time if, at that time—

(a)

Part 2 cannot apply to the tenancy because—

(i)

none of the property comprised in the tenancy is or includes premises which are occupied by the tenant, or

(ii)

property comprised in the tenancy is or includes premises which are occupied by the tenant, but none of those premises are so occupied for the purposes of a business carried on by the tenant or for those and other purposes,

(b)

the terms of the tenancy include terms (the “permitted business use terms”) which would permit the tenant to occupy the premises for the purposes of a business carried on by the tenant (whether the terms permit occupation for the purposes of business generally, a specific business or a specific kind of business) or for those and other purposes, and

(c)

if the tenant were to occupy the premises in accordance with the permitted business use terms (and taking into account all other circumstances), Part 2 of this Act would apply to the tenancy.

(3)

For the purposes of sub-paragraph (2)(b), terms of the tenancy which—

(a)

would prohibit the tenant from occupying the premises for some purposes, but

(b)

would not prohibit the tenant from occupying the premises for other purposes,

are to be regarded as terms which would permit the tenant to occupy the premises for the purposes which are not prohibited.

(4)

Sub-paragraph (2) must be construed as one with section 23(1).

“Business tenancy with a rent review”

2

(1)

A tenancy is a “business tenancy with a rent review” at a particular time if, at that time—

(a)

it is a business tenancy, and

(b)

it is subject to rent review terms (whether contained in the instrument creating the tenancy or not).

(2)

In this Schedule “rent review terms” means terms under which an amount of rent payable under the tenancy will or may change during the term of the tenancy (“rent under review”).

Part 2

Triggering and operation of rent reviews

Application of this Part

3

(1)

This Part of this Schedule applies to a tenancy at a particular time if—

(a)

at that time it is a business tenancy with a rent review,

(b)

the tenancy was—

(i)

granted, or

(ii)

varied so that it is subject to rent review terms,

after this Schedule came into force, and

(c)

that grant or variation was not made under protected pre-commencement arrangements.

(2)

For that purpose “protected pre-commencement arrangements” means arrangements that were entered into before this Schedule came into force.

(3)

But arrangements under which the tenancy was granted are not protected pre-commencement arrangements if—

(a)

the tenancy is a new tenancy within the meaning of Schedule 7B,

(b)

the arrangements are a tenancy renewal arrangement within the meaning of Schedule 7B, and

(c)

the tenancy renewal arrangement was entered into on or after 17 March 2026,

(and see paragraph 3(2) of Schedule 7B for the meaning of “new tenancy” and “tenancy renewal arrangement”).

Tenant to have power to trigger a rent review

4

(1)

This paragraph applies if—

(a)

an action is necessary for a particular rent review to be initiated (a “trigger action”), and

(b)

the rent review terms, or any other terms (whether contained in the instrument creating the tenancy or not), do not allow the tenant to take the trigger action.

(2)

The tenant may initiate the particular rent review by giving the landlord notice in writing.

(3)

Notice under sub-paragraph (2) may not be given after the time when trigger action may be taken.

Tenant to have power to take action to enable rent review to operate effectively

5

(1)

This paragraph applies if—

(a)

an action is necessary for a particular rent review to operate effectively (an “operational action”), and

(b)

the rent review terms, or any other terms (whether contained in the instrument creating the tenancy or not), do not allow the tenant to take the operational action.

(2)

The tenant may take the operational action.

(3)

If the tenant takes the operational action, the tenant must give the landlord notice in writing of the action within the period of seven days beginning with the day on which the action was taken.

Part 3

Rent review terms that are of no effect

Application of this Part

6

(1)

This Part of this Schedule applies to a tenancy at a particular time if—

(a)

at that time it is a business tenancy with a rent review,

(b)

at that time the rent review terms—

(i)

do not specify new passing rent, and

(ii)

include elements 1 and 2,

(c)

the tenancy was—

(i)

granted, or

(ii)

varied so that it is subject to rent review terms that do not specify the new passing rent and include elements 1 and 2,

after this Schedule came into force, and

(d)

that grant or variation was not made under protected pre-commencement arrangements.

(2)

For that purpose “protected pre-commencement arrangements” means arrangements that were entered into before this Schedule came into force.

(3)

But arrangements under which the tenancy was granted are not protected pre-commencement arrangements if—

(a)

the tenancy is a new tenancy within the meaning of Schedule 7B,

(b)

the arrangements are a tenancy renewal arrangement within the meaning of Schedule 7B, and

(c)

the tenancy renewal arrangement was entered into on or after 17 March 2026,

(and see paragraph 3(2) of Schedule 7B for the meaning of “new tenancy” and “tenancy renewal arrangement”).

Rent review terms that “do not specify new passing rent”

7

Rent review terms “do not specify new passing rent” if they are such that an amount of rent under review that will be payable at a time during the term of the tenancy (the “new passing rent”)—

(a)

is not known, and

(b)

cannot be determined,

at the time when the tenancy is granted or varied so that it includes the terms.

Elements 1 and 2

8

(1)

This paragraph sets out elements 1 and 2.

(2)

Element 1: an amount of rent (the “reference amount”) is determined by reference to—

(a)

the effect of inflation or any other index or multiplier on the rent,

(b)

the amount of either or both of the following—

(i)

actual rent for premises;

(ii)

a hypothetical market rent, or other notional rent, for premises, or

(c)

the amount of the tenant’s turnover.

(3)

The premises for which rent falling within sub-paragraph (2)(b) is, or is assumed to be, payable may be either or both of the following—

(a)

the premises demised by the tenancy which is subject to the rent review terms;

(b)

other premises (whether real or hypothetical).

(4)

The reference in this paragraph to the amount of a notional rent for premises includes an amount calculated in accordance with the rent review terms on the basis of actual or assumed information or other assumptions.

(5)

Element 2: the amount of the new passing rent—

(a)

will be different from the reference amount, or

(b)

could be different from the reference amount (whether or not the amount could, alternatively, be the reference amount).

Amount of new passing rent to be larger than reference amount

9

(1)

This paragraph applies in relation to a particular rent review if the amount of the new passing rent determined in accordance with the rent review terms would be larger than the reference amount.

(2)

That includes cases where the amount of the new passing rent would be—

(a)

smaller than the rent under review, but

(b)

still larger than the reference amount.

(3)

The rent review terms are of no effect to the extent that they would result in the new passing rent being larger than the reference amount.

(4)

The amount of the new passing rent is instead to be the same as the reference amount.

Exceptions

10

(1)

The Secretary of State may, by regulations, provide for exceptions from paragraph 9 (whether an exception relates to the paragraph generally or to an aspect of the paragraph).

(2)

Regulations under this paragraph—

(a)

may include transitional or saving provision;

(b)

may make different provision for different purposes;

(c)

are to be made by statutory instrument;

(d)

may not be made unless a draft of the statutory instrument containing the regulations has been laid before Parliament and approved by a resolution of each House of Parliament.

Part 4

Sub-tenancy required to include rent review terms that would be of no effect

Application of this Part

11

(1)

This Part of this Schedule applies to a tenancy (the “superior tenancy”) at a particular time if, at that time—

(a)

the superior tenancy is a business tenancy,

(b)

the superior tenancy requires or permits the grant of a sub-tenancy (the “authorised sub-tenancy”),

(c)

the authorised sub-tenancy would, at the time of its grant, be a business tenancy with a rent review, and

(d)

either—

(i)

the superior tenancy requires the authorised sub-tenancy to include rent review terms, and that requirement can only be complied with by the inclusion of rent review terms which (on one or more particular rent reviews) would produce, or would be capable of producing, the result that is prohibited by paragraph 9(3), or

(ii)

the superior tenancy permits the authorised sub-tenancy to include rent review terms, but rent review terms can only be within that permission if (on one or more particular rent reviews) they would produce, or would be capable of producing, the result that is prohibited by paragraph 9(3).

(2)

But this Part applies to the superior tenancy only—

(a)

if the superior tenancy was—

(i)

granted, or

(ii)

varied so that it is subject to rent review terms that do not specify new passing rent and include elements 1 and 2,

before this Schedule comes into force, or

(b)

if the superior tenancy is—

(i)

granted, or

(ii)

varied so that it is subject to rent review terms that do not specify new passing rent and include elements 1 and 2,

after this Schedule comes into force and the grant or variation is made under arrangements entered into before then.

Modification of terms of superior tenancy

12

(1)

The superior tenancy has effect after this Schedule comes into force as if it requires, or as the case may be permits, the authorised sub-tenancy to include rent review terms of any kind which (on each particular rent review) would not produce, and would not be capable of producing, the result that is prohibited by paragraph 9(3).

(2)

The actual rent review terms that are to be included in a particular authorised sub-tenancy are to be—

(a)

agreed by the persons who are to be the landlord and tenant under that sub-tenancy, or

(b)

determined in such other manner as they may agree.

(3)

Accordingly, the landlord under the superior tenancy may not require the inclusion of particular rent review terms in the authorised sub-tenancy (unless that is what is agreed by the persons who are to be the landlord and tenant under the sub-tenancy).

(4)

This paragraph does not prevent a superior tenancy from being varied or modified by the parties to it (and accordingly sub-paragraphs (1) to (3) are subject to any such variation or modification).

Interpretation

13

(1)

The following provision applies for the purposes of this Part of this Schedule.

(2)

The superior tenancy permits the grant of a sub-tenancy, or the inclusion of particular rent review terms in a sub-tenancy, if granting the sub-tenancy, or including those terms, would not breach the terms of the superior tenancy.

(3)

References to the superior tenancy, and references to the terms of the superior tenancy, include references to—

(a)

the terms of any agreement relating to the superior tenancy, and

(b)

any document or communication from a party to the superior tenancy which gives or refuses consent for the grant of a category or description of sub-tenancy.

(4)

“Superior tenancy” has the meaning given in paragraph 11(1).

(5)

“Sub-tenancy” means a tenancy that is inferior to the superior tenancy (whether or not it is immediately inferior to that tenancy).

(6)

The “result that is prohibited by paragraph 9(3)” means the result that the new passing rent is larger than the reference amount.

Part 5

General provision

Anti-avoidance

14

An agreement (whether contained in the instrument creating the tenancy or not) is void if, or to the extent that, it purports to require the tenant to make a payment in respect of any difference in an amount of rent which results from the operation of any other provision of this Schedule.

Interpretation

15

(1)

In this Schedule—

• “business tenancy” has the meaning given in paragraph 1;

• “business tenancy with a rent review” has the meaning given in paragraph 2.

(2)

In this Schedule, in relation to a business tenancy with a rent review—

• “elements 1 and 2” means element 1 and element 2 set out in paragraph 8;

• “inflation” means a change in prices or costs (including a change in certain kinds of prices or costs) whether or not calculated by an official index; and here “prices or costs” includes rents;

• “new passing rent” has the meaning given in paragraph 7;

• “particular rent review” means a particular occasion when the relevant rent review terms operate or are to operate;

• “reference amount” has the meaning given in paragraph 8(2);

• “rent review terms” has the meaning given in paragraph 2(2);

• “rent under review” has the meaning given in paragraph 2(2).

(3)

A reference in this Schedule to rent review terms that do not specify new passing rent has the meaning given in paragraph 7.

Schedule 7B

Arrangements for renewal of tenancies: prohibited terms

Section 54A

Application of this Schedule

1

This Schedule applies at a particular time if, at that time, conditions A to F are met.

Condition A: a business tenancy

2

(1)

Condition A is met if Part 2 of this Act—

(a)

applies to the tenancy, or

(b)

has the potential to apply to the tenancy.

(2)

In the following paragraphs of this Schedule—

(a)

the tenancy to which Part 2 applies, or has the potential to apply, is referred to as the “existing tenancy”;

(b)

the premises let under the existing tenancy are referred to as the “relevant premises”.

(3)

For the purposes of this paragraph, Part 2 has the potential to apply to the existing tenancy if—

(a)

Part 2 cannot apply to the existing tenancy because—

(i)

none of the relevant premises are occupied by the tenant, or

(ii)

the relevant premises are or include premises which are occupied by the tenant, but none of those premises are so occupied for the purposes of a business carried on by the tenant or for those and other purposes,

(b)

the terms of the tenancy include terms (the “permitted use terms”) which would permit the tenant to occupy relevant premises for the purposes of a business carried on by the tenant (whether the terms permit occupation for the purposes of business generally, a specific business or a specific kind of business) or for those and other purposes, and

(c)

if the tenant were to occupy relevant premises in accordance with the permitted use terms (and taking into account all other circumstances), Part 2 of this Act would apply to the tenancy.

(4)

For the purposes of sub-paragraph (3)(b), terms of the existing tenancy which—

(a)

would prohibit the tenant from occupying relevant premises for some purposes, but

(b)

would not prohibit the tenant from occupying relevant premises for other purposes,

are to be regarded as terms which would permit the tenant to occupy relevant premises for the purposes which are not prohibited.

(5)

Sub-paragraph (3) must be construed as one with section 23(1).

Condition B: a tenancy renewal arrangement

3

(1)

Condition B is met if the tenant under the existing tenancy is a party to a tenancy renewal arrangement.

(2)

In this Schedule—

• “new tenancy” means a new tenancy of the whole or a part of the relevant premises;

• “tenancy renewal arrangement” means an arrangement under which the tenant under the existing tenancy—

  1. (a)

     can require the landlord or another person to grant a new tenancy, or

  2. (b)

     can be required by the landlord or another person to take a new tenancy.

Condition C: tenancy renewal arrangement on or after 17 March 2026

4

Condition C is met if the tenancy renewal arrangement is entered into on or after 17 March 2026.

Condition D: initial rent not known

5

Condition D is met if the rent payable at the start of the term of the new tenancy (the “initial rent”)—

(a)

is not known, and

(b)

cannot be determined,

at the time when the tenancy renewal arrangement is entered into.

Condition E: terms for determining the initial rent

6

Condition E is met if the tenancy renewal arrangement is subject to terms for determining the initial rent (the “rent determination terms”) (whether or not those terms are included in the same instrument as the tenancy renewal arrangement).

Condition F: method for determining the initial rent

7

(1)

Condition F is met if the rent determination terms include elements 1 and 2 (whether or not they include any other elements).

(2)

Element 1: an amount of rent (the “reference amount”) is determined by reference to—

(a)

the effect of inflation or any other index or multiplier on the rent under the existing tenancy,

(b)

the amount of either or both of the following—

(i)

actual rent for premises;

(ii)

a hypothetical market rent, or other notional rent, for premises, or

(c)

the amount of the tenant’s turnover.

(3)

The premises for which rent falling within sub-paragraph (2)(b) is payable may be either or both of the following—

(a)

the premises demised by the existing tenancy;

(b)

other premises (whether real or hypothetical).

(4)

The reference in this paragraph to the amount of a notional rent for premises includes an amount calculated in accordance with the rent determination terms on the basis of actual or assumed information or other assumptions (such as the use of rent determination terms which provide for a turnover rent so as to calculate an amount of notional rent on the basis of actual or assumed turnover).

(5)

Element 2: the amount of the initial rent—

(a)

will be different from the reference amount, or

(b)

could be different from the reference amount (whether or not the amount could, alternatively, be the reference amount).

Amount of initial rent to be larger than reference amount

8

(1)

This paragraph applies in relation to the new tenancy if the amount of the initial rent determined in accordance with the rent determination terms would be larger than the reference amount.

(2)

That includes cases where the amount of the initial rent would be—

(a)

smaller than the rent under the existing tenancy, but

(b)

still larger than the reference amount.

(3)

The rent determination terms are of no effect to the extent that they would result in the initial rent being larger than the reference amount.

(4)

The amount of the initial rent is instead to be the same as the reference amount.

Exceptions

9

(1)

The Secretary of State may, by regulations, provide for exceptions from paragraph 8 (whether an exception relates to the paragraph generally or to an aspect of the paragraph).

(2)

Regulations under this paragraph—

(a)

may include transitional or saving provision;

(b)

may make different provision for different purposes;

(c)

are to be made by statutory instrument;

(d)

may not be made unless a draft of the statutory instrument containing the regulations has been laid before Parliament and approved by a resolution of each House of Parliament.

Anti-avoidance

10

An agreement (whether contained in the tenancy renewal arrangement or not) is void if, or to the extent that, it purports to require the tenant to make a payment in respect of any difference in an amount of initial rent which results from the operation of any other provision of this Schedule.

Interpretation

11

In this Schedule, in relation to a tenancy—

• “existing tenancy” has the meaning given in paragraph 2(2);

• “inflation” means a change in prices or costs (including a change in certain kinds of prices or costs) whether or not calculated by an official index; and here “prices or costs” includes rents;

• “initial rent” has the meaning given in paragraph 5;

• “new tenancy” has the meaning given in paragraph 3(2);

• “reference amount” has the meaning given in paragraph 7(2);

• “relevant premises” has the meaning given in paragraph 2(2);

• “rent determination terms” has the meaning given in paragraph 6;

• “tenancy renewal arrangement” has the meaning given in paragraph 3(2).”