Home / The impact on lease negotiations – The Retail Leisure and Hospitality (RHL) Scheme
26th June 2025
Carmen Lui, Solicitor
The RHL Scheme was introduced by the Government as a result of the COVID-19 pandemic to assist commercial tenants with their financial burden by reducing business rates for occupied properties.
During COVID-19 business rates were reduced to 75% for qualifying businesses (which included shops, restaurants, pubs, cinemas, hotels, and leisure facilities) with a cap of £110,000 per business. However, as of 1 April 2025, this has been further reduced to 40% with the cap remaining at £110,000. Further changes are set to be made in 2026 to permanently lower business rate multipliers for properties that have a rateable value under £500,000. However, such reductions will be funded by a higher multiplier on properties with a rateable value over £500,000.
As a result of the business rate changes, it raises important considerations and implications from a property law perspective, particularly in relation to landlord-tenant relationships.
a) Rent
With tenant’s bearing the burden of paying increased business rates, they will need to reassess affordability as it will inevitably put pressure on the businesses’ finance. Tenant’s may want to consider negotiating a lower rent with their landlords to counterbalance the reduction in rates relief.
Tenants who pay a turnover rent may want to consider whether or not the reduced rates will have an impact on the calculation of rent as the reduced rates burden may lead to a reduction in profitability. The lease should therefore include clear definitions of turnover and excluded income to account for the changes in the RHL scheme.
b) Forfeiture
More tenants are likely to fall into rental arrears as a result of the higher business rates liability they are currently faced with, particularly, tenants who run smaller independent businesses.
Where tenant’s fail to pay rent, typically within 21 days, it gives Landlord’s the right to exercise their forfeiture rights i.e. the right to re-enter the premises and to terminate the lease. Tenants should therefore ensure that forfeiture for failure to pay rent is linked to payment of annual rent only to protect themselves. Any references to “any other sums” should not be included. However, vacant properties do not qualify for RHL relief and therefore Landlords are incentivised to keep properties occupied. In such circumstances, Landlord’s may want to consider offering rental concessions to their tenants instead.
c) Rent review
If rent reviews are on an open market basis, the reduced rates relief may have an influence on rent review outcomes. Experts in the area will need to consider whether a hypothetical tenant would factor in the reduction in rates relief into the rent they are willing to pay.
Whilst the current reduced rates appear to have a negative impact on smaller business, the government’s new system which comes into effect on 1 April 2026 should give them more permanent support. In the meantime, both landlord and tenants should be prepared during lease negotiations to ensure that the financial pressures are effectively managed.
It will be interesting to see how bigger retailers will respond to the new scheme in 2026 and how this will affect their lease negotiations.
Given the potential lease implications the RHL Scheme may have, it is important to seek specialist legal advice when negotiating the terms of the lease. Here at Kuits, we have a team of solicitors who have expertise in negotiating commercial leases and can provide the guidance you need. If you have any questions, please do not hesitate to get in touch with us.