The Renters' Rights Act 2025 (the Act), which came into force on 1 May 2026, represents the most comprehensive reforms to the Private Rented Sector (PRS) in over 30 years. While the Act does not apply directly to commercial leases, it has important indirect implications for commercial property transactions, particularly where assets have both commercial and residential uses. This is therefore particularly prevalent for landlords of mixed-use properties, such as where a property consists of a shop and a flat with different tenancies.
Landlords, investors and developers dealing with mixed-use properties should be aware of how the new regime may affect disposals, acquisitions, asset management and development strategies. This article examines the considerations which should be taken by those dealing with mixed-use property subject to a residential tenancy.
Phased Implementation
Due to the considerable reforms being introduced to the sector, the Act is being implemented in three stages to enable landlords and tenants to become familiar with the measures. The roadmap for the implementation of the Act is set out below to assist landlords, investors and developers of mixed-use assets to plan accordingly.
Phase 1- in force from 1 May 2026:
- Abolition of section 21 'no fault' evictions.
- Introduction of Assured Periodic Tenancies within the PRS.
- Reformation of possession grounds within the PRS.
- Limitation of rent increases to once per year within the PRS.
- Ban on rental bidding and requesting more than one month's rent in advance.
- Prohibition on discriminating against renters with children or who are in receipt of benefits.
- Introducing a requirement for landlords within the PRS to consider tenants requests to keep a pet at the property.
- Strengthening of local council enforcement and rent repayment orders.
Phase 2 - commencing in late 2026:
- National rollout of the PRS Database.
- Introduction of the PRS Landlord Ombudsman.
Phase 3 - dates to be confirmed following consultation:
- Introduction of the Decent Homes Standard to the PRS.
- Extension of Awaab's Law to the PRS.
Grounds to End a Tenancy
One of the most notable changes introduced by the Act is the abolition of section 21 "no-fault" evictions. Residential tenants can now only be evicted using one of the prescribed statutory grounds under section 8 of the Housing Act 1988, regardless of any provisions to the contrary in their tenancy agreement. This represents a fundamental shift away from landlord flexibility towards a more regulated possession regime, which has consequences for any commercial transaction involving residential tenants.
Two of the main reasons why a landlord may wish to end a tenancy are discussed in greater detail below:
Sale:
Where a landlord is seeking to sell mixed-use property with vacant possession, the Act will directly apply to the residential portion of the tenancy.
The landlord will here be able to terminate the tenancy under section 8, Ground 1A, on the basis that they wish to sell the property. The landlord must give four months' notice to the tenant (an increase from the previous two months), and they cannot do this within the first 12 months of a new tenancy. In addition, landlords must be able to demonstrate a genuine intention to sell the property to use this ground.
This can have key transactional implications for landlords of mixed-use tenancies. Landlords should consider extended sale timelines where vacant possession is required for the sale, particularly as at least four months' notice must be given to the tenant. This may encourage a shift towards selling with tenants in situ, although this trend is yet to be seen in practice.
Development:
The Act will also affect any redevelopment and refurbishment plans of mixed-use properties. Due to the abolition of section 21, landlords who wish to redevelop their property must rely on section 8, Ground 6, on the basis that the property needs to be redeveloped or demolished, and it is not feasible to do this whilst the tenant is living there. As with the sale of a property, four months' notice must be given to the tenant of the residential portion of the property, and this ground cannot usually be used within the first 6 months of a tenancy.
Landlords may be impacted by reduced flexibility in aligning vacant possession with their development timelines and should carefully consider if they are planning to develop in the near future before entering into a new tenancy agreement. Additionally, developers who are seeking to acquire mixed-use property should undertake careful pre-acquisition due diligence to determine if the property is being sold with vacant possession.
Landlords may recognise these grounds as being similar to those required to terminate a lease with security of tenure under the 1954 Act. It remains to be seen whether the courts will take a similar approach to interpreting and upholding the grounds under the Renters' Rights Act, and this will be interesting to see in practice.
For further guidance on the grounds to end a tenancy as it affects your mixed-use assets, please see our 'How We Can Help' section below.
Tenants' Ability to End a Tenancy
Under the Act, residential tenants are now able to end a tenancy at any time by giving two months' notice to the landlord. While the increased flexibility is clearly advantageous from a tenant perspective, it materially alters the risk profile for landlords. In particular, the removal of longer-term certainty around income streams means that landlords may experience a reduced ability to forecast cash flow with confidence. This is especially prevalent in the context of mixed-use investments, where residential units often form part of a wider asset strategy designed to generate stable, predictable income to support financing arrangements or cross-subsidise other elements of the development.
For landlords and investors, this change may encourage a more active approach to asset management, including contingency planning for shorter tenancy durations and potential volatility in rental income. It may also have implications for valuation and obtaining security over the property, as lenders and valuers may place less weight on residential income streams that can be terminated at short notice. Ultimately, whilst the Act promotes tenant autonomy, it introduces a degree of operational and financial uncertainty that landlords will need to carefully navigate.
Rent Increases
Under the Renters' Rights Act, rent can now only be increased every 12 months, and not at all within the first year of a tenancy. Landlords must give a minimum of two months' notice of their intention to increase the rent of the residential portion of a mixed-use property and must do this on Form 4A.
Tenants are able to challenge the initial rent price, or any reviewed rent, within the first six months of the tenancy/increase. This challenge must be made to the First-Tier Tribunal, and there is no cost to the tenant for challenging the rent. Even if the Tribunal decide in favour of the landlord, the tenant will not be responsible for the landlord's costs, and the increase will not take place until the end of the Tribunal process.
The considerable benefits afforded to the tenant through the challenge procedure indicates that landlords may be more frequently faced with rent review challenges from tenants. This poses a clear administrative burden on the landlord and could result in greater costs than the proposed rent increase would realise. Accordingly, landlords may wish to give greater consideration into any rent increases which they propose.
As rent can only be increased annually, landlords should consider whether there are any upcoming plans for the property within the next 12-month period which would require an enhanced rent to be paid to retain profitability. For example, if a landlord increases the rent of the residential portion of their property by a piecemeal sum in April, and in December requires increased rental income to carry out works to the property, they would be unable to achieve a higher rent to account for this until the following April. Subsequently, landlords may wish to have a more forward-thinking outlook when considering any rental increases to their mixed-use property.
For further guidance on rent increases as it affects your mixed-use assets, please see our 'How We Can Help' section below.
Private Rented Sector (PRS) Database
Under Phase 2 of the Act's implementation process, a digital database will be established to keep a clear record of landlords operating within the Private Rented Sector and ensure compliance across the sector. It will become a mandatory requirement for landlords to register to the PRS Database, and all landlords must pay an annual fee, the value of which is yet to be confirmed. Public access to the database will be granted shortly after the requirement for landlords to register is implemented.
Whilst the exact information which is required to be input onto the PRS Database is yet to be confirmed, it is likely to include the landlord's contact details, property address and type, number of bedrooms and residents, occupation and furnishing status, and safety information including Gas, Electric and Energy Performance Certificates.
Investors and developers who are acquiring mixed-use properties with a residential element will need to account for the obligation to register for and appear on the PRS Database as part of their asset management planning.
Private Rented Sector (PRS) Landlord Ombudsman
In Phase 2 of the implementation process, a PRS Ombudsman scheme will be established, which aims to provide fair, impartial and binding solutions to any complaints brought by tenants about their landlord. The Ombudsman service will also support landlords through giving them guidance, tools and training on how to appropriately handle tenant's complaints. All landlords must comply with the rulings of the Ombudsman, with local councils being responsible for enforcing the decisions.
Under the Act, all private landlords in England with assured tenancies will be legally required to join the scheme and fund the service, and this requirement is likely to come into place in 2028, after the PRS database has been introduced. Accordingly, this is a new ongoing compliance cost which landlords of mixed-use properties should be aware of and account for in advance of its implementation.
Decent Homes Standard
In Phase 3 of the implementation of the Act, the Decent Homes Standard will be extended to the Private Rented Sector for the first time. This represents a clear commitment to ensuring that residential rental properties meet a minimum quality standard, again demonstrating the clear protections afforded to tenants by the Act. Under the Decent Homes Standard, properties are required to be free from serious health and safety hazards, in a reasonable state of repair, equipped with reasonably modern facilities and services, and provide a reasonable degree of thermal comfort.
Whilst there is no confirmed date for the implementation of Phase 3 of the Act, investors and developers of mixed-use assets should ensure they have an awareness of this forthcoming standard to inform their refurbishment and maintenance plans and requirements for the residential elements of their buildings.
Awaab's Law
Under Phase 3 of the Act's implementation, Awaab's Law will be extended to the Private Rented Sector. Once implemented, landlords will be required to address any reported emergency health and safety hazards and all damp and mould hazards within specified strict timeframes.
Under Awaab's Law, any emergency works must be investigated and rectified within 24 hours of the landlord becoming aware of the issue. Any significant hazards must be investigated within ten working days of the landlord being informed of them, and the landlord must share a written summary of their findings with the tenant within three working days of concluding the investigation. Landlords must then begin remedial safety works within five working days of the investigation concluding, or where that is not possible, as soon as possible, and no later than 12 weeks after the investigation concludes. If landlords are unable to complete works within this timescale, they must offer to provide alternative accommodation to the tenant.
There is no set date for the extension of Awaab's law to the Private Rented Sector, however it is intended to take effect at the same time as the Decent Homes Standard is implemented. For landlords of mixed-use assets, this will have profound practical implications on the maintenance and management processes relating to the residential portion of the tenancy. Landlords need to ensure they are prepared for the implementation of Awaab's Law into the sector and take time to consider their obligations and how they can ensure these are adhered to.
Licences to Occupy
In a mixed-use context, it is paramount that landlords and operators take care not to grant licences to occupy instead of leases as a means to avoid the protections afforded to tenants by the Act. If a resident of a property has exclusive possession and pays rent to the landlord, the arrangement is likely to be treated as a tenancy in law, regardless of how the agreement is termed by the parties. Accordingly, such residents will benefit from the full protections of the Act, and the landlord cannot seek to vary this by virtue of the name given to the arrangement.
Landlords and operators of mixed-use properties should take time to consider whether any 'licences' in place are actually legal tenancies and should take time to familiarise themselves with the provisions of the Act to determine how it will impact themselves and their tenants.
Considerations for Purchasers of Mixed-Use Properties
Buyers who are acquiring mixed-use properties should undertake careful due diligence on the residential portion of the sale as a result of the Act.
Under the Act, landlords have an obligation to protect tenancy deposits for both new assured tenancies and tenancies which were assured shorthold tenancies immediately prior to 1 May 2026. Buyers acquiring mixed-use properties must verify that sellers have properly protected any assured tenancy deposits, as non-compliance could prevent the buyer from serving a section 8 notice to recover possession and may result in financial sanctions.
Buyers should also ensure that any tenant who is to remain in the property following the sale received either a written statement or an information sheet. A written statement should be used if the tenancy was entered into after 1 May 2026, setting out information about the terms of the tenancy. Alternatively, an information sheet should be given to tenants whose tenancy was created prior to 1 May 2026, setting out information about how their tenancy may be impacted by the Act. Potential buyers of a mixed-use property should make enquiries regarding whether this information has been properly circulated to any tenants.
For further guidance on due diligence as it affects your mixed-use assets, please see our 'How We Can Help' section below.
How We Can Help
The first phase of the Renters' Rights Act's tenancy reforms came into force on 1 May 2026, and our team of experts is ready to assist with detailed advice and practical guidance in relation to all aspects of the Act as it affects mixed-use properties.
We have extensive expertise advising landlord investors, developers, private and professional landlords including major institutions, offshore investors, landed estates, registered providers, letting agents and property companies on all types of rented tenure. Members of our team are active on various professional bodies, such as the British Property Federation's Residential Management Committee, the BPF's Student Accommodation Committee, and the Association of Rental Living, giving us unique insight into the operational issues facing private rental landlords across a range of sectors.
We have long-standing relationships with our clients and, in many cases, work with them throughout the lifetime of an asset. By getting to know our clients and their specific properties, we identify the commercial issues and drivers that are important and relevant to them, allowing us to provide flexible and practical solutions that are consistent with the value at stake.
We can assist with:
- General advice in respect of the Act
- Reviewing and updating tenancy agreements
- Drafting new assured periodic tenancy agreements
- Advising on the new prescribed information to send to tenants
- The procedure for obtaining possession and the updated grounds for possession, including the new prescribed form of Notice Seeking Possession
- The impact of the Act on shared ownership leases
- Rent increase procedures, including preparation of statutory rent increase notices
- The impact of the Act on different types of student accommodation, including regulatory advice and guidance on tenancy documentation
- Managing the risk of Rent Repayment Orders
If you would like to understand more about the effect of the Act on your mixed-use property interests, please get in touch with one of our key contacts below.
Conclusion
The Act represents a fundamental power shift from landlords to tenants, and the implications of this feed directly into mixed-use assets. Landlords, developers and purchasers should adopt a more proactive and forward-looking approach to asset management and transaction planning when the property has a residential tenancy attached.
Disclaimer – The content within this article is intended to provide an overview for informational purposes only, is subject to change, and its application may vary depending on individual circumstances. Independent legal advice should be sought before taking action.
