2025 marked a year of accelerated legislative reform, landmark decisions and shifting risk in both commercial and residential property markets. As the year draws to a close, we’ve taken stock of the biggest developments impacting landlords, tenants and investors — and what these changes mean heading into 2026.

Across this three-part series, we explore:

• Part 1: Commercial property — a year of reform proposals, case law and financial pressures
• Part 2: Residential property — the most significant shake-up in renting for a generation, building safety and major leasehold reform
• Part 3: Development — the evolving legal landscape for developers, from rights of light to emerging tenure models

Each instalment highlights what mattered in 2025 and offers a look ahead to what you can expect in the new year.

PART 1 - COMMERCIAL PROPERTY: 2025 IN REVIEW 

Commercial property underwent a period of intense scrutiny in 2025, with sweeping reform proposals, a renewed focus on outdated statutory frameworks and mounting financial pressures affecting landlords and tenants alike. In this first part of our annual review, we outline the major changes on the horizon and the practical risks that shaped negotiations and market behaviour throughout the year. 

Major legal changes on the horizon for commercial property

The commercial property landscape in England and Wales is bracing itself for reform. These changes could reshape landlord-tenant dynamics by modernising so-called outdated frameworks, challenging long-established leasing practices and addressing persistent challenges in the market.  Here’s what you need to know. 

1. Goodbye to upwards-only rent reviews?

One of the biggest talking points is the proposed ban on upwards-only rent review (UORR) clauses under the English Devolution and Community Empowerment Bill, currently making its way through Parliament.  For decades, UORR clauses have been a landlord’s best friend, guaranteeing that rents never go down even when the market does.  That predictability has been a cornerstone of investment-grade leases, offering commercial landlords predictable income.  But if this ban goes through, things could look very different. 

Key points:

• Applies to all new business leases and renewals (including those excluded from the Landlord and Tenant Act 1954 or not). It also applies whether the tenant is in occupation or not.
• Not retrospective – existing leases stay as they are.
• Covers all open market, index-linked or turnover reviews if they are upward-only.
• Fixed or stepped rents and those that offer genuine upwards or downwards review mechanisms might be permissible. Caps and collars might not be.
• Anti-avoidance rules will block creative workarounds, including side agreements and put/call options which aim to circumvent the ban.
• Bans on UORR clauses in subleases granted post-ban could expose intermediate landlords to income gaps if their own pre-ban headleases contain enforceable UORR clauses.
• Tenants will gain the right to trigger rent reviews even if the lease says otherwise, giving tenants more control over timing.

Whilst talk of banning upward reviews isn’t new, its inclusion in the draft Bill has come as a surprise to many. The British Property Federation has already aired its concerns about the proposals, especially as they have been included in the Bill without any prior consultation or warning, claiming the announcement has “spooked investors” and will “hurt the UK’s reputation for stable policymaking”. If approved, the abolishment of UORR clauses could fundamentally alter valuation models and debt servicing assumptions for investors, whilst tenants gain flexibility in volatile markets. But the ban will have consequences for tenants too. Landlords may simply respond by favouring higher initial rents, fixed uplifts or shorter excluded leases. There is also an expectation that the ban will lead to index-linked reviews and turnover rents and shift battlegrounds to other incentives. 

The Bill still has some way to go and amendments to the proposals are likely. To stay ahead of the game, stakeholders should take heed of the proposed changes and get to grips with what the ban could mean for their leases and investments.

2. RIP to Part 2 of the Landlord and Tenant Act 1954? Not quite.

Following a Law Commission consultation this year, the security of tenure regime under Part 2 of the 1954 Act was put under scrutiny, as part of a broader legislative agenda to modernising so-called outdated frameworks. The 1954 Act has been targeted as an unnecessarily complex, costly and unsuitable regime for the present commercial leasing environment, but the provisional conclusion of the consultation is that it should undergo tweaks, not wholesale reform. 

Key points: 

• Contracting-out stays – landlords and tenants can still agree to exclude renewal rights. Proposals to make security of tenure mandatory or abolish it altogether have been dismissed.
• Minimum term threshold for security should rise from six months to two years, reducing protection for a greater number of short-term occupiers.
• Further technical reforms to simplify contracting-out procedures should be addressed.
• Exclusion categories (e.g. agricultural tenancies) should remain unchanged.

The core right to renew is likely to remain, with the status quo offering certainty.  Raising the qualifying term threshold is logical with the trend in some sectors towards excluded shorter-term lettings anyway. But, doing this will likely lead to uncertainty for tenant businesses who have leases under two years. Streamlining the unwieldy contracting-out process is at least likely to be welcomed by both parties, relieving administrative burdens.  The second stage of consultation is expected to take place soon, with the possibility of changes being implemented in 2026.

3. The Law Commission’s 14^th programme – commercial leasing reform back on the agenda?

Following publication of its programme in September is the Law Commission’s plans to review the Landlord and Tenant (Covenants) Act 1995 (LTCA 1995) and the Landlord and Tenant Act 1987 (LTA 1987).  As currently drafted, these have been causing significant problems in practice, creating difficulties for businesses, preventing sound transactions and imposing needless bureaucracy. 

Key points:

• The LTCA 1995 was supposed to free tenants and guarantors from future liability after assignment.  But the rules have created unintended barriers, especially for intra-group re-organisations, with tenants being unable to assign leases to guarantors and guarantors being unable to offer repeat guarantees, even if landlords don’t object.
• The LTA 1987 gives qualifying residential tenants the right of first refusal on disposals, but the process is costly and slow and carries the threat of criminal sanctions if not followed correctly.  The rules also create a headache for mixed use properties where the grant of long leases of commercial parts can also be considered relevant disposals, potentially triggering the need to serve notices even where residential tenants have no interest the commercial parts. 

Clarification and simplification of these areas will make a big difference and is expected to be widely welcomed by the industry. Details, next steps and timetables of the Law Commission’s review will be confirmed in due course. 

Why does any of this matter?

If these changes come to fruition, they are not just legal tweaks.  The commercial property sector is on the cusp of a significant legal shake up. These changes will challenge entrenched practices and reshape negotiations.  Landlords, tenants and investors will need to be prepared to navigate the transitions and take advantage of the opportunities they bring. 

Season of goodwill?: Commercial property risks this December Quarter Day

At the risk of being the Scrooge of the S&B property disputes team, with the December quarter day approaching — falling on Christmas Day itself — landlords will be hoping their tenants give the gift of timely rent payments. 

The Quarter Day present

Quarter days are a long-standing tradition in UK commercial leases, requiring tenants to pay three months’ rent in advance. While some businesses have negotiated monthly rental payments in their leases, it remains a significant quarterly cash outlay for most.  December’s coincides with festive spending and hopes for a peak trading period for hospitality. Hospitality businesses in particular will be hoping for a bumper festive season to cover not only the regular advance rent payment, but also to offset as much as possible the costs increases and other headwinds continuing to impact the sector now and in the year ahead, not least in light of last month’s Budget. 

The Budget’s ghost of Christmas yet to come

The most immediate impact from the Budget for hospitality businesses and commercial property generally was in changes to business rates next year.  While there has been a reduction for many premises, the stark warning from the sector is that many hospitality businesses will see significant rises as a result of the changes to valuations, with many fearing closure without further support from the government. 

Coupled with continuing high operating costs, as the third largest employer in the UK, the increase in the National Living Wage in April 2026 adds further pressure to the hospitality sector.

Insolvency: A frosty New Year?

Latest figures show insolvency rates remain stubbornly high, with retail and hospitality continuing to be among the hardest hit. For landlords, this means close monitoring of any late or non payers and assessing their options early if there is a risk of rent arrears turning into full-blown tenant insolvency. 

Landlords will be checking their lease terms closely for any additional security in the event of rent default — AGAs, guarantors and rent deposits and will be alert to any warning signs from their tenants — late payments, requests for concessions, or simply silence. Early advice is key.

Conclusion

Despite its ongoing challenges, the UK’s hospitality sector remains a major economic driver, employing over 2.6 million people.  The sector is estimated to have a market value of £48.4bn in the UK, with projected expectations of growth by 2030 to reach £57.5bn. The early part of the new year and particularly the impact of the new business rates from April 2026 will be closely watched for signs of impact on that projected growth. 

Against a backdrop of hospitality recovery in the years following the pandemic and continuing costs rises, this Christmas quarter day rent payment may be an unwelcome cash drain for hospitality businesses. Will 2026 see a new season of goodwill with landlords of hospitality businesses adopting a collaborative approach to navigating any payment challenges, keeping their premises occupied amid continuing uncertainty in the wider economy and understanding the challenges being faced by the sector — or will the bailiffs be on standby come January? 

2025 brought the most ambitious proposals for commercial property reform in over a decade. With further consultations expected and economic pressures continuing to shape landlord–tenant relationships, 2026 will be a pivotal year for adaptation. In Part 2 of our series, we turn to the residential sector — where sweeping reforms to renting, leasehold rights and key decisions on building safety dominated the year.

To discuss how any of this year’s developments may impact your position, please get in touch with a member of our property disputes team.