Six things for 2026: What commercial landlords should be thinking about

For commercial landlords, 2026 presents a set of pressures that require careful attention. Tenants are more cost-conscious, investors are applying closer scrutiny to asset quality and performance, and compliance expectations around buildings continue to evolve. At the same time, landlords need flexibility: the ability to reposition assets, respond to market changes, and maintain control over buildings that may need adapting over the coming years.

Many landlord risks do not announce themselves dramatically. They accumulate slowly through lease terms that restrict flexibility, cost pressures that damage tenant relationships, or compliance obligations that were not properly factored into asset planning. The gap between how a building is managed day-to-day and what the lease documentation actually permits is often where problems emerge.

Here are six issues commercial landlords should be watching closely this year.

1. Lease drafting determines whether your asset plan is actually achievable

Landlords often discover too late that the leases they granted years ago now prevent them from doing what the building needs. Weak control over alterations means tenants have changed the building in ways that complicate future lettings. Limited redevelopment rights mean the landlord cannot respond to changing demand. Overly tenant-friendly alienation clauses mean the building fills with occupiers the landlord would not have chosen.

The problem is that lease negotiations are often treated as formulaic exercises rather than strategic decisions. Standard precedents get used without questioning whether they support the landlord’s actual plans for the asset. In 2026, this matters more because investor expectations around repositioning and ESG improvements are higher, and buildings that cannot adapt lose value.

If you are negotiating new lettings this year, the lease should be drafted with a clear view of what might need to happen to the building over the next decade. That includes refurbishment rights, access for modernisation works, and sufficient control over how tenants use and alter the premises. These are not aggressive landlord protections. They are asset management tools and losing them can make an otherwise good building difficult to reposition when market conditions change.

2. Energy performance requirements are tightening, and landlords with lower-rated buildings should be planning now

Minimum energy performance standards are expected to tighten further in the coming years. While the exact timeline remains subject to final Government confirmation and may change, C ratings are anticipated for new lettings from 2028, with stricter requirements likely by 2030. Even with regulatory uncertainty, the commercial impact is already being felt.

Tenants are raising energy performance at heads of terms stage, particularly in competitive lettings. Funders and investors are factoring EPC ratings into valuations and lending decisions. Buildings that cannot demonstrate credible performance or a clear plan for improvement are attracting discounts or being passed over entirely.

The legal risk for landlords is not only the prospect of future regulatory non-compliance. It is making informal commitments during negotiations that become binding without being properly documented or priced. Side letters, email exchanges, and marketing materials can create obligations that landlords did not intend to assume.

Landlords with buildings currently rated D or below should be treating upgrading as a planned capital investment with clear legal rights to execute. This means checking whether lease terms allow access for improvement works, whether costs can be recovered, and whether tenant cooperation is required. The landlords in the strongest position are those who can demonstrate to tenants and investors that they have a credible plan and the legal ability to deliver it, regardless of when final regulations are confirmed.

3. Tenant distress and enforcement strategy require commercially calibrated decision-making

In 2026, landlords are still operating in a market where tenant affordability varies widely by sector. Even where demand exists, void risk, incentives and re-letting costs can make it commercially sensible to preserve an income stream rather than take immediate enforcement action at the first sign of difficulty.

The legal issue is that landlord remedies are not always straightforward, and the wrong step at the wrong time can reduce leverage or create avoidable delay. Arrears and covenant breaches often develop gradually, with tenants seeking informal concessions, deferrals or temporary variations to payment terms. Where those discussions are not carefully managed and documented, landlords can end up with unintended outcomes, including uncertainty over what has been agreed, disputes about the position later, or difficulty reasserting strict lease rights when the relationship deteriorates.

Landlords should approach tenant distress strategically rather than treating enforcement as automatic. That includes understanding what remedies are available, what evidence is needed to support action, and how to preserve flexibility. It also means checking whether lease terms provide appropriate protection through rent deposits, guarantors, insurance rent mechanisms, interest provisions and clear default clauses.

A practical point is that enforcement is not only a legal decision. It is an asset management decision. For some assets, early action may be essential to prevent arrears escalating or to protect value. In other cases, a managed solution that stabilises income and avoids an expensive vacancy period may produce a better outcome overall.

The strongest landlord positions are often those where options are preserved early. That means prompt monitoring of arrears, careful documentation of any concessions, and a clear plan for what “recovery” looks like if a tenant’s position worsens. Where distress is handled proactively, landlords are typically better placed to protect income and maintain control, even if the situation later escalates.

4. Service charge recovery requires clear drafting and careful management

Service charge remains a frequent source of tension in landlord-tenant relationships. Commercial service charges are not subject to statutory control. They are entirely contractual, and recovery depends on what the lease terms Tenants are more alert to cost increases, more willing to scrutinise expenditure, and more likely to resist recovery where they consider costs unreasonable or improperly incurred.

Even where the lease clearly permits recovery, disputes can arise over whether costs fall within the service charge definition, whether expenditure was reasonably incurred, or whether costs relate to improvements rather than maintenance. Sweeper clauses designed to capture additional expenditure are often interpreted narrowly by courts. Costs incurred outside the accounting period specified in the lease may not be recoverable until a later period, creating cashflow issues.

The practical challenge in 2026 is that many cost pressures are outside landlords’ direct control. Insurance premiums have increased significantly, utility costs remain volatile, and maintenance costs have risen. Tenants understand this, but they also expect transparency, advance notice of significant expenditure, and realistic budgeting that does not produce large unexpected balancing charges.

Landlords benefit from two things: clear lease drafting that leaves no doubt about what is recoverable and how it is apportioned, and a management approach that reduces the likelihood of challenge. That means transparent accounting, proper substantiation of costs, advance communication about major expenditure, and realistic annual budgets. Disputes over service charge can damage relationships, delay rent reviews, and in some cases lead to formal disputes that are expensive and time-consuming to resolve.

Where landlords are planning significant capital expenditure on common parts or building systems, checking whether costs can be recovered through service charge, whether tenant consent is required, and how works should be phased can avoid problems later. Landlords who manage service charge well tend to retain tenants longer and avoid the friction that comes with contested bills.

5. Rent review clauses matter more when market conditions are uncertain

In stable markets, rent review provisions tend to attract less scrutiny. In 2026, with economic conditions still unpredictable and rental performance varying by sector and location, the detail of rent review drafting has become commercially significant again. Assumptions, disregards, and definitions of open market rent can all affect outcomes, and disputes are more likely where drafting is unclear or where lease incentives, fit-out contributions or tenant works raise questions about what constitutes a true comparable.

Landlords are also encountering questions about whether rent-free periods, stepped rents or capital contributions given at lease inception should be disregarded when calculating rent review. The answer depends on how the lease is drafted. Many older leases do not deal with this clearly, and ambiguity can become a bargaining chip or a dispute trigger when a review falls due.

In practice, rent review disputes often come down to the detail of the hypothetical lease terms and the evidence each party relies on when arguing open market rent. For landlords negotiating new leases, rent review provisions should be treated as income protection, not boilerplate. That means clear disregards that reflect how the market operates in practice, unambiguous drafting of the hypothetical lease, and wording that minimises the scope for dispute.

For existing leases approaching review, landlords benefit from reviewing the rent review provisions well before the review date. That gives time to identify issues, plan strategy and avoid the review itself becoming a source of delay, cost or wider relationship friction. In a market where comparables may be limited, or where sector pressures distort headline figures, careful preparation can make a material difference to outcome.

6. Dilapidations strategy should start years before lease end, not months

Dilapidations claims are rarely handled well at the last minute. Where a landlord has already lost time, or where there is pressure to re-let quickly, leverage diminishes and tenants know it. The reality is that many repair and reinstatement obligations only protect asset value if they are backed by early action and realistic planning.

The Pre-Action Protocol for dilapidations sets out clear expectations for how landlords and tenants should approach end-of-lease repair issues. The Protocol expects landlords to serve schedules in good time and to quantify claims properly. But landlords often delay until late in the term, by which point the tenant has already mentally moved on and the building may have deteriorated further.

Landlords benefit from earlier engagement: interim inspections during the term, photographic records of condition, and clear communication about expectations well before the tenant starts planning their exit. This does not mean aggressive enforcement. It means creating a clear factual record and managing expectations so that dilapidations do not become a surprise issue in the final months of the lease.

There is also a practical question about whether pursuing full reinstatement makes commercial sense. If the building needs refurbishment anyway, or if the next letting will require reconfiguration, insisting on full reinstatement may delay re-letting and cost more than it recovers. The statutory cap on dilapidations recovery means that where the landlord intends to carry out different works, full reinstatement costs often cannot be recovered.

The legal right to claim dilapidations is valuable, but the strategy should be calibrated to suit income and value. That means early assessment, realistic quantification, and a clear plan for what happens to the building after the tenant leaves. Landlords who approach dilapidations as part of overall asset management, rather than as a negotiation to be handled by surveyors at the end of the term, tend to achieve better outcomes with less friction.

Conclusion

For landlords, 2026 is not just about maintaining rental income. It is about protecting asset value in a market where tenants are more cautious, compliance expectations continue to evolve, and the ability to adapt buildings to changing requirements is increasingly important.

Many landlord risks do not emerge from major disputes. They accumulate slowly through lease terms that restrict control, cost pressures that are not managed transparently, or asset strategies that the existing documentation no longer supports. Landlords who treat leasing, asset management and compliance as one joined-up strategy will be best placed to retain both stability and flexibility.

The strongest landlord positions are built on documentation that supports long-term plans, cost management that maintains tenant confidence, and enforcement strategies that are commercially calibrated rather than automatic. In a year where both tenant expectations and investor scrutiny remain high, that combination of clarity, control and pragmatism will matter more than ever.