UK Real Estate Sector: 2026 and Beyond
Having spent much of 2025 focussing on residential leasehold reforms, the government is expected in 2026 to focus on commercial property reforms which have been speculated about but not progressed as far to date. We highlight below our thoughts on some of the issues affecting, and potential changes to the UK commercial real estate environment which are anticipated to have an impact in 2026 and beyond. Potential impact will be on investors, landlords, tenants and developers across various commercial sectors.
We expect there to be a further emphasis on environmental provisions, the increase of tenants’ rights as against landlords and the widening of community rights of certain assets as against landowners.
January 2026
Service Charge RICS code update
The updated RICS Professional Standard, Service charges in commercial property (2nd edition) took effect from 31 December 2025. Its objective is to improve standards of service charge management for commercial properties and promote best practice. It is compulsory for all RICS-accredited professionals.
This updated standard (or Code), is aimed at property managers and occupiers. It seeks to improve overall standards and promote greater transparency, fairness, and consistency in the management and administration of service charges across commercial properties. It aims to ensure that budgets and year-end certificates are delivered in a timely manner and encourages effective dispute resolution. The Code also provides guidance to solicitors, their clients (whether owners or occupiers) and service charge managers on the negotiation, drafting, interpretation and operation of leases, in line with best practice. However, the Code does not override lease terms and is not legally binding but sets industry benchmarks and is a vital reference point for negotiations and dispute resolution. The Code can be accessed here.
Landlords and tenants should be aware of the new Code. While not mandatory for landlords unregulated by RICS, it offers a balanced position on service charge management and administration. It also promotes best practice, reduces disputes and enhances transparency and trust in service charge matters.
Spring 2026
Security of tenure reform
Last year, we looked at the Law Commission’s initial consultation on the models for renewal of business tenancies under the Landlord and Tenant Act 1954 (the “LTA 1954”). The Law Commission completed its phase 1 consultation on 19 February 2025. It provisionally concluded that the existing model for contracting out of the security of tenure provisions of Part 2 of the LTA 1954 is the right model. Consultees commented that this model struck the right balance between landlords and tenants and that changes to this would cause unwarranted disruption for commercial leases. It is expected that a second technical phase 2 of the consultation into specific aspects of the LTA 1954 will be published this Spring
The Law Commission has provisionally concluded that the minimum six-month term of business tenancies protected by the LTA 1954 should be increased. The second consultation paper is likely to consult on increasing this threshold to a minimum of a 2 year term. It appears that exclusions from the LTA 1954 for types of tenancy, such as agricultural tenancies, will not be extended. Aspects of the LTA 1954 which are also likely to be considered in the phase 2 consultation include reform to the contracting out procedure to reduce the burden on landlords and tenants, grounds on which landlords may recover possession at the contractual end of a protected tenancy, compensation when a tenancy is terminated and, hopefully, consideration of the appropriate process for determining terms of a renewal lease in unopposed lease renewals.
Ban on upward only rent reviews
The government’s English Devolution and Community Empowerment Bill, published on 10 July 2025 (the “Bill”) included (to the surprise of the property industry without any prior announcement or consultation) proposals prohibiting upwards-only rent reviews in new and renewal commercial leases, rendering such provisions unenforceable if enacted.
An upwards-only rent review keeps the reviewed rent to the higher of the current passing rent and the open market rent or index linked uplifted rent, such that rent may remain static or increase but cannot decrease; some such clauses also incorporate a percentage “collar” to artificially inflate the rate of increase if RPI/CPI has remained static or low.
The government’s stated objective is to make leasing fairer for tenants and to help revitalisation of the high street; however, as currently drafted, the prohibition applies to all commercial leases, with limited exemptions for agricultural holdings, tenancies of six months or less, and farm business tenancies. For further details on the proposals see our commentary.
These proposed reforms represent a clear shift towards more balanced rent review mechanisms by removing upwards-only provisions from future and renewal leases, with significant implications for occupiers and investors. The Bill continues to progress at pace through Parliament and is now at the committee stage in the House of Lords. While 2026 may be the defining year for its passage, it could become law late 2026/ 2027, though it is not known if the proposals will come into force immediately.
Assets of Community Value
The government’s English Devolution and Community Empowerment Bill, published on 10 July 2025 (the “Bill”) also proposes wide-ranging changes to the Asset of Community Value (ACV) framework. Although no draft regulations have yet been published, the proposals indicate a broader listing scope, enhanced procedural rights for community groups, and a more restrictive sales environment for owners, with corresponding administrative and compliance implications for local authorities, property owners and investors.
The definition of community value would be widened to include properties that contribute to a local community’s economic wellbeing or interest, alongside the existing social tests, for example, pubs, local stores and allotments. Importantly, qualifying use may be assessed by reference to “a time in the past,” capturing assets that are vacant or converted. This is likely to increase nomination volumes, raise evidential burdens on local authorities, and intensify planning tensions where historic and current uses diverge, particularly where reinstatement is disputed on deliverability or viability grounds. A new statutory category of “sporting asset of community value” would capture outdoor sporting grounds with spectator accommodation (including artificial or natural structures) while excluding closed indoor facilities. Unlike standard ACV listings, such designations would not expire remaining on the register indefinitely.
Significant changes to the transaction process are proposed. The reforms introduce a ‘preferred buyer’ status (i.e. if a community group offers a valuer determined market value, property owners could be prevented from selling to others for up to 18 months). Community nominators would gain new procedural rights to request a review and to appeal to the First tier Tribunal where nominations are refused; powers currently reserved to property owners. The combined effect is likely to be longer sale timetables, reduced transactional certainty, and outcomes constrained by valuation approaches that may underweight development potential and hope value.
Key operational details remain unclear pending regulations; these include the scope and effect of progress reviews and safeguards for owners’ timing and value interests. Further clarity is expected as the Bill proceeds through Parliament in 2026
April 2026
New register of contractual controls
The Levelling-up and Regeneration Act 2023 contains provisions for the creation of a new public register of contractual control agreements, a dataset increasing transparency regarding ownership and control of land in England & Wales (operated by the Land Registry). Despite a lack of progress since the publication of draft regulations and a consultation in 2024, recent signs suggest headway is expected in 2026. The Housing Minister’s March 2025 letter to the Land Registry identified contractual controls as a key priority for 2026, referring to the “rapid design and delivery of the digital systems required to collect and publish details of contractual control arrangements, ahead of the planned full public launch of the data collection system in 2026”. The Land Registry is also soliciting feedback from local authorities on the planned system.
As currently proposed, disclosable agreements, including option and pre-emption agreements, conditional contracts and promotion agreements for more than 12 months must be registered. Excluded from these disclosure requirements are agreements for less than 12 months with no right to extend and agreements made to facilitate finance and loan agreements, as well as overage and clawback agreements and restrictive covenants. Unregistered land is outside the regime. Registration must include the agreement type, dates, location, duration of the control and parties, provided within 60 days of the agreement being entered into. Any changes to this information must also be updated within 60 days. The regulations only require publication of mandatory information, so commercially sensitive details in the agreement will remain confidential. Non-compliance will be a criminal offence and if the mandatory information is not provided, the Land Registry may refuse to register a notice or restriction in relation to the agreement against the relevant title resulting in no protection for the developer.
The requirements are expected to apply retrospectively to agreements made after 6 April 2021, assuming the regulations take effect on 6 April 2026. Developers and investors will have a 12-month transition period to comply, potentially increasing administrative workloads reviewing and disclosing control contracts back to 2021.
Once the final regulations are published, parties will be better able to identify transactional issues which will need to be considered and the additional Land Registry requirements. Once operational, interested parties will be able to search the Land Registry register as part of standard due diligence in a property transaction. In the longer term, broader access to information that was previously confidential could increase land prices, add barriers to development, and strengthen the position of sellers and project opponents
Spring 2026
Martyn’s Law update
The Terrorism (Protection of Premises) Act 2025 (also known as Martyn’s Law) was enacted in April 2025 after six years of campaigning led by Figen Murray OBE whose son, Martyn Hett, died in the Manchester Arena terrorist bombing. It aims to ensure the public is better protected from terrorism by requiring certain public premises and events in the UK to be prepared and ready to keep people safe in the event of an attack.
A tiered approach is established under the new duty, with those responsible for premises and events in scope required to fulfil different requirements according to the number of individuals it is reasonable to expect may be present:
- Smaller premises where 200 to 799 individuals may be present will be in the ‘standard tier’. The requirements in this tier are centred on simple, low-cost activities designed to reduce harm and save lives in the event of an attack, for example, identifying safe routes to cover, lockdown.
- Larger premises and qualifying public events where 800 or more individuals may be present will be in the ‘enhanced tier’ and will have further requirements. This includes having in place, so far as is reasonably practicable, appropriate public protection measures to reduce their vulnerability to acts of terrorism and the risk of physical harm if an act of terrorism was to occur for example, bag search policies, CCTV.
For more details, please refer to our earlier briefings.
The Act is not yet in force, and the government has signalled an implementation period of at least 24 months to allow duty holders to plan and prepare. As of November 2025, the Security Industry Authority (SIA) was confirmed as the regulator and has stated it is preparing for commencement in spring 2027. The role of the SIA will be to provide advice on and ensure compliance with the regulatory requirements of the legislation, supporting those responsible for qualifying premises and events to meet their obligations.
The next steps will be for the government and SIA to continue the preparatory work and the Home Office to publish guidance, expected Spring 2026.
June 2026
Landlord insurance commission – The Trocadero case
The Court of Appeal is scheduled to hear an appeal in June 2026 against the High Court's decision in Trocadero (2015) LLP v Picturehouse Cinemas Ltd and others [2025], where the High Court ruled that the landlord must reimburse the tenant approximately £700,000 in overcharged insurance rent, dating back nearly a decade.
The landlord, London Trocadero, arranged buildings insurance for the Trocadero Centre and passed the gross insurance premiums on to its tenants as “insurance rent”, as permitted under the leases. However, the landlord had also negotiated substantial commission rebates from its brokers which it retained. The court decided the landlord was not entitled to include the insurance commission in the tenant's insurance rent, as the commission did not form part of the premium payable for keeping the centre insured, i.e. the genuine insurance cost.
While the decision centred on the specific lease wording, the insurance rent provisions were not particularly unusual in the market leading to landlords and tenants scrutinising insurance clause drafting. For landlords, the decision underscores the need for precise drafting, especially regarding clauses for costs beyond standard premiums, and for tenants, it shows the importance of checking insurance rent and service charge provisions before committing, and that tenants may now have grounds to contest additional charges. The appeal is awaited with interest.
Date unknown 2026
Energy performance and sustainability
Will 2026 deliver clarification and targeted reform of the MEES Regulations and the EPC regime following a period of uncertainty for commercial landlords and tenants? The government consulted in 2024 on changes to the EPC regime, including proposals that EPCs issued in the second half of 2026 are expected to carry a five‑year, rather than ten‑year, validity period to capture more up‑to‑date data and recent improvements. From the second half of 2026, the methodology for assessing energy performance is due to shift from a consumption and running‑cost focus to a multi‑metric approach that considers energy sources, fabric performance, heating efficiency, smart readiness and energy cost. In addition, a proposal that all heritage/listed buildings must have an EPC, removing the current uncertainty around the position with listed buildings. However, to date no government response has been published and there is no indication when and how these proposals will be implemented.
Closely linked with the proposals to update EPCs is the long- awaited policy changes to the operation of MEES for commercial property. The government indicated it would publish its response to the 2021 Non‑Domestic Private Rented Sector MEES consultation in early 2025; however, as at the beginning of 2026, no response has been published. This means requirements beyond 2028 for the non‑domestic sector remain unclear. It is generally expected that a minimum EPC rating of ‘B’ will take effect between 2030 and 2035, but guidance is awaited on whether, and when, any interim ‘C’ requirement will be introduced.
Despite ongoing political uncertainty, ESG issues remain relevant for occupiers, developers and investors in a landscape of potential increases to corporate reporting requirements around sustainability. Following a government consultation last year (June to September 2025), the government aims to publish finalised versions of UK Sustainability Reporting Standards for voluntary use in early 2026. Consideration will follow on whether requirements will be introduced for certain UK entities to report against these standards.
Green lease drafting will continue to play a role in supporting both landlords’ and tenants’ sustainability goals. In April 2025, the Model Commercial Lease was amended with some updates from the Better Building Partnership Green Lease Toolkit. MCL guidance, however, emphasises that the MCL seeks to reflect the market position, such that not all of the Toolkit’s clauses have been incorporated. For example, various provisions regarding Social Impact (broadly covering benefits to the local community, including training opportunities and support for local businesses) are omitted. With the overarching government goal of achieving net zero by 2050, we may see further strengthening of environmental provisions within leases, though it remains to be seen whether the market standard will move towards the more onerous “dark” green iterations of various environmental clauses.
Later 2026
An update on High Street Rental Auctions
The compulsory rental auction of vacant high street premises in England, referred to as High Street Rental Auctions ("HSRAs"), grants local authorities a statutory power under Part 10 of the Levelling-up and Regeneration Act 2023 to step in and auction short-term leases of empty high street properties in certain circumstances. The plan is to transfer control of vacant properties from landlords to local authorities so they can benefit the local economy and community. A more detailed overview is available here.
These powers apply to properties on designated high streets or in town centres considered vital to the local economy due to a high concentration of high street activities. Properties must suit typical high street uses, such as shops, restaurants, cafes, bars, pubs, entertainment venues, and nearby compatible offices. Before an authority can conduct a rental auction, there is a two-stage notice procedure with a landlord's right of appeal.
For businesses looking for space in high street locations, rental auctions may open up opportunities to secure premises that have lingered on the market. Leases offered through this route will be short-term, typically between one and five years, and on standardised terms prescribed by law. This can reduce negotiation time but also means there may be limited scope to tailor the lease to occupier’s needs.
At the time of writing, these auction powers require secondary legislation and formal commencement before councils can run auctions. Implementation depends on regulations and guidance being brought into force and on each local authority designating the relevant high streets or town centres. Until those steps are completed, the powers are not operational. Prospective occupiers should check the latest government commencement regulations and local authority announcements to confirm when the scheme is live in their area. In 2026, the first HSRAs may emerge as local authorities begin implementing or planning them following new powers granted by the government in late 2024. Pilots and planning are underway in councils like Lewisham and Breckland, and councils such as Kingston upon Thames include HSRAs in their economic strategies, signalling they are preparing to use its powers.
Please contact Sarah Morley if you have any questions.
