Following on from our look at the new Renters’ Rights Act 2025 (the Act) last week, we now briefly consider the implications for development and investment.
Implications for different types of accommodation
- Purpose Built Student Accommodation (PBSA) – this type of accommodation will largely be exempt from the provisions of the Act if the landlord or its manager joins a government-approved management code of practice, such as the ANUK or the Unipol National Code and the tenancies are granted to full-time students at specified educational institutions. It may be a requirement of the code provider that deposits are to be protected in a third-party scheme.
This type of tenancy is generally a common law tenancy, and landlords will still be able to offer fixed-term contracts to tie in with the academic year. Rent can be required in advance for the whole term or the whole academic year. - Short-term rental arrangements – genuine holiday lets and serviced accommodation, such as that offered for temporary workers, are usually exempt from the Act. Similarly, in cases where guests do not have exclusive possession and the operator controls the services and property management, the Act does not generally apply.
Landlords need to ensure agreements with occupants do not inadvertently extend to fall under the definition of a long-term tenancy, at which point compliance with the Act would be required. This is done by ensuring that agreements are clearly worded to avoid unintentional liability.
Effect of proposed changes on property development, investment and related commercial considerations
Property development
Property developers will need to ensure that properties not only meet the Decent Homes Standard, but that they will be efficient to maintain to this level.
Investment
- Investment strategies – with higher maintenance costs and the potential for longer void periods if work is needed to return a property to the required standards, landlords will need to ensure investment strategies match the new rental landscape.
Good presentation of the property, high-quality marketing, and flexibility, such as allowing tenants to have pets, have the potential to reduce the time a property stands empty and attract strong candidates.
Landlords will also need to deal with rent increases efficiently, putting a review process in place that ensures reviews are carried out as soon as the law allows. Those with substantial portfolios can stagger reviews to manage their financial position. - Funding structures – lenders will require strict compliance with the new laws, and landlords will need to budget for additional costs, such as meeting the required property standards, investing to meet long-term maintenance obligations, ombudsman scheme fees, database fees, and the potential for increased legal fees if lenders require enhanced due diligence work to reassure them of compliance.
Landlords who previously required a larger sum from tenants upfront will now need to work with no more than five weeks’ deposit. - Project viability – developers and investors will need to consider their bottom line at the outset, taking the increased costs and letting risks into account. Choosing the right development or investment property will be crucial in avoiding crippling expenses, legal liability for rehousing a tenant, or substantial penalties imposed by the local authority.
- Long-term returns – to maintain the best possible long-term return on investment, it would be prudent for developers and investors to ensure adequate rent is charged from the start of a tenancy, and that opportunities to review this each year are not missed.
How 3CS can help
Our experienced property solicitors can assist you with landlord and tenant law and advice for developers and investors. For expert guidance or representation, please get in touch.
