The Renters’ Rights Act 2025 (Act) represents the most significant overhaul of England’s private rented sector in decades. It received Royal Assent on 27 October 2025 but is (largely) not yet in force.
In November, the Implementation Roadmap was published, setting out the three phases in which the Act will be brought into effect. The Government’s stated aims are to rebalance the landlord-tenant relationship, enhance tenant security, and raise property standards.
While the Act only affects residential tenancies within scope, the ripple effects will be felt across the commercial property landscape, particularly for investment owners of mixed-use schemes and developers who are in the process of building, or planning to build, new residential lettings units to sell.
(Note: the Act makes special provisions regarding purpose-built student accommodation, but that is outside the scope of this article.)
Why this matters for commercial property investors and developers
1. Rental returns
The Act fundamentally changes how landlords can manage income streams.
The Act introduces restrictions on how landlords can increase rent: from 1 May 2026 contractual rent review provisions will be banned (and those already included in tenancy agreements will be void), and landlords may only increase rent once per year, on two months’ notice, by following the statutory process.
The tenant can challenge the initial rent within the first six months of any new tenancy, or on any subsequent, proposed new rent if they consider it unreasonable. The tenant can do this by applying to the First-tier Tribunal (Tribunal), which is free for the tenant to do, and they need not pay the landlord’s costs, even if they lose. The tenant will then pay the lower of the open market rent or the rent proposed by the landlord, and the rent will only change on the date of the Tribunal’s decision. Given that there will essentially be no risk to a tenant in making an application, it may well be that frequent applications are made as a matter of course. This will have cost and administrative consequences for owners of residential investment property.
The Act also prevents bidding wars, making it illegal to accept anything above the advertised rent and prohibiting the payment of rent in advance. This is something landlords may currently ask for where tenants cannot pass the usual financial checks (perhaps because they are new to the country). This means that landlords and their agents will have to think carefully about how they advertise their properties, how they can most accurately determine the market rate, and how they assess prospective tenants.
2. Underlying capital value
The Act’s emphasis on tenant security and compliance may influence asset valuations.
When section 21 ‘no-fault’ evictions are abolished (30 April 2026 is the last day on which one can be served), landlords will only be able to end a tenancy and gain possession by serving notice on one of the grounds under section 8 and Schedule 2 of the Housing Act 1988 as amended and extended by the Act.
There is a new ground for possession where the landlord either intends to sell the property, or to live in it themselves (or allow a family member to do so). These grounds require four months’ notice and cannot be used within the first 12 months of a new tenancy. Landlords can also seek possession if they wish to redevelop the property, and the work cannot reasonably be done with the tenant in situ – here it is important to ensure that the identity of the landlord and the identity of the party actually carrying out the development fit within the parameters set out in the Act.
Landlords can still terminate a tenancy where the tenant is in breach, damages the property or is guilty of antisocial behaviour, but some time limits have increased. The tenant must now have failed to pay rent for three months (both at the time the notice is served and at the time of the possession hearing), rather than two months before), and the landlord must give four, rather than two weeks’ notice.
While it may be true that the many landlords currently only use section 21 out of convenience (for reasons which would otherwise be amply covered by the new grounds for possession), the changes do reduce flexibility for landlords. Gaining possession under the new grounds is likely to take longer, as the ground will need to be made out and can be challenged at court, in a way in which section 21 cannot be. New restrictions on the ability for landlords to obtain vacant possession quickly may affect the liquidity and marketability of residential property portfolios.
Time will tell if these changes, coupled with restrictions on rent reviews, lead valuers to apply more conservative assumptions on income streams and in turn depress valuations.
3. Compliance and portfolio profitability
The Act introduces new obligations concerning the state and condition of dwellings that carry cost and potential long-term operational implications.
All properties in the private rented sector will have to be registered on a new database (when it is up and running, which is expected to be late 2026) and marketing an unregistered property to let will be illegal. Failure to comply will attract penalties of up to £7,000 (or up to £40,000 or potential criminal sanctions, for persistent or repeat offences). This creates an additional administrative burden for landlords and a clear enforcement risk for non-compliant owners. The extra time and expense of complying with the new registration requirements will need to be factored in when making investment decisions.
Membership of the Landlord Ombudsman Scheme will also become mandatory (registration is likely to be required by 2028), with tenants able to seek action and rent repayment orders against their landlord if the landlord is found to be in breach. Previously, tenants who considered their landlords were not maintaining the property adequately (or had other grievances) had to rely on Local Authorities to take action or go to Court. The Ombudsman (which will be free for tenants to use) is likely to present a considerably more attractive option. This may lead to an increase in tenants complaining about the state of their properties and landlords.
The Act will also extend the Decent Homes Standard (DHS), and Awaab’s Law to the private rented sector. These have previously only applied to social housing. The DHS will require landlords to ensure housing is in good repair with reasonably modern facilities and thermal comfort. Awaab’s Law provides that where hazards such as damp and mould are found in properties, the landlord must deal with them within fixed timescales. These are likely to take a few years to come into force, but again, the additional management and compliance burden should be factored into future profitability calculations.
These developments raise a strategic question: what makes money now, and what will make money in the future? Older properties may require significant capital expenditure to meet the new requirements and landlords must decide whether such investment is commercially viable. For some portfolios, the answer may be selective disposal rather than refurbishment.
Practical steps
Audit existing tenancies
Although the Act will catch most residential occupations, there are some exceptions (lettings for less than £250 per annum (or £1000 in London), or more than £100,000 per annum, for example). Service occupancy agreements, common law tenancies and other occupations outside the statutory code (such as lettings of dwellings to companies, rather than individuals) are also not caught. Landlords may decide to review what will be caught by the Act, and where necessary, serve section 21 notices to regain possession if it is strategically important to have vacant possession in the near future (e.g. the property has development or sale potential).
Rent
Consider whether all properties are fully rented and whether rents need reviewing now. Landlords may consider benchmarking market values so that they can defend current rents with suitable comparables if they are later challenged at a tribunal.
Plan for compliance
Budget for the time and cost that will be required to meet database and Ombudsman registration requirements (the level of fees is currently unknown, but the landlord is likely to pay per property). Ensure properties meet safety and energy standards now and the paperwork is in order, and available for registration in due course.
The increased costs of complying with the new rules, combined with landlords’ limited ability to review rent and regain possession, is likely to compress margins and challenge profitability. Owners may wish to conduct a full audit of their portfolios now to establish what properties are caught by the Act, what work is required to be done to them and what the potential returns are.
For tailored advice on how the Act affects your property interests, please contact our Commercial Real Estate team.
Many thanks to trainee Luke Sheridan for their help in writing this article.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, November 2025