The Renters’ Rights Act 2025

Implications for Residential Lettings in Retail Property

Mixed-use portfolios, from flats above shops to residential units in shopping centres and urban retail blocks, are about to undergo a significant shift. The Renters’ Rights Act 2025 introduces sweeping reforms across the private rented sector, and retail property managers with residential elements in their estates must now prepare for a fundamentally different regulatory landscape.

This article outlines the key changes and explains what they mean specifically for those managing residential units in retail environments.

Important changes for retail property managers

Under the new regime:

• The rules apply even if residential lettings are only a small part of your holdings.
• The changes will affect existing tenancies, not just new ones.
• Compliance obligations will increase, particularly in buildings where retail and residential functions interact structurally or operationally.

The result is a growing need for residential expertise within portfolio management.

Phase 1 (from 1 May 2026): Abolition of ASTs in mixed-use properties

Every existing AST above a shop or within a mixed-use retail site will convert automatically into an assured periodic tenancy. This means:

• No fixed terms: You cannot bind tenants to six-month or annual minimum periods.
• No Section 21 evictions: Recovering possession will require reliance on the revised statutory grounds.
• Two-month tenant notice: Tenants can move out with two months’ notice at the end of any rent period, increasing the risk of voids.

For retail property managers, this creates operational uncertainty. Units previously timed, for example, with refurbishment of a shopping parade, will now require more careful planning.

Revised grounds for possession: Practical consequences for retail environments

The Act maintains but expands the Section 8 grounds for possession. For mixed-use sites, several have particular relevance:

• Moving in or selling: These grounds are permitted, but only after a 12-month protected period and with four months’ notice.
• Redevelopment (Ground 6): The redevelopment ground is expanded. This is critical for retail managers undertaking structural works, façade upgrades or repurposing upper floors.
• Anti-social behaviour: Grounds remain available, but proof thresholds still apply. This is relevant where conduct affects commercial tenants or customer-facing areas.

Importantly, landlords cannot market or re-let properties for 12 months after using certain grounds, which will require careful sequencing of works.

Rent increases and upfront payments

Residential units above retail spaces often operate differently from standard BTL properties: rents may bundle utilities, management charges or reflect shared building services. The new rules affect this:

• Rent may be increased only once per year, via the statutory process.
• Rent review clauses cannot be used, even those linked to commercial maintenance costs.
• Advance rent is capped: You may not demand more than one month’s rent in advance of the period it relates to.
• Ban on bidding wars: Even in prime high-street locations, you cannot accept offers above the advertised rent.

Operational policies: Pets, discrimination and written information

From 1 May 2026:

• Pet requests must be considered reasonably, which may impact insurance and fire strategy in mixed-use buildings.
• You cannot refuse applicants solely because they receive benefits or have children.
• All tenants must receive written, government-specified information, requiring updates to onboarding processes.

Managers of older high street buildings, where noise transfer or access issues are common, may need to revisit building rules to ensure compliance while managing operational risks.

Phase 2 (2026–2028): Registration, oversight and dispute resolution

The Private Rented Sector Database (PRS Database)

Retail property managers and landlords will need to:

• Register themselves and every residential unit.
• Include database identifiers in marketing materials.
• Maintain accurate records.

Crucially, you cannot obtain a possession order unless the landlord and property have active entries on the database.

Ombudsman

Once compulsory (likely from 2028), tenants will be able to use the ombudsman for free, and decisions will be binding. For managers accustomed to informal dispute handling, this introduces formal oversight similar to commercial redress schemes already in place for retail operations.

Phase 3 (2035 onwards): Long-term building standards

Decent Homes Standard

Retail buildings with historic or ageing upper floors may require investment to meet new standards of safety, warmth and repair. The delayed implementation (2035 or 2037) gives managers time to plan:

• Improved insulation above shops.
• Replacement of outdated services.
• Fire safety improvements tailored to mixed-use environments.

Awaab’s Law

Strict response deadlines for damp, mould and serious hazards will apply. This is especially relevant for:

• Flats above restaurants and takeaways.
• Older terraced retail units.
• Buildings with limited ventilation or shared services.

What retail property managers should do now

Immediate actions (before May 2026)

1. Audit all residential lettings, including informal agreements.
2. Update tenancy templates, removing fixed terms and prohibited clauses.
3. Review rent increase schedules to ensure compliance.
4. Refresh tenant selection policies to remove discriminatory wording.
5. Train management teams, especially those whose expertise lies primarily in commercial property.
6. Review building policies (pets, access, refuse, fire strategy).
7. Prepare communications for existing tenants to comply with the requirement to provide information by 31 May 2026.

Medium-term actions (2026–2028)

• Budget for the PRS Database annual fees.
• Establish internal systems to maintain accurate property records.
• Develop protocols for ombudsman complaints.
• Strengthen maintenance scheduling, given future Awaab’s Law obligations.

Long-Term Actions (2030–2037)

• Commission condition surveys of upper-floor units.
• Plan long-term capital expenditure for Decent Homes Standard compliance.
• Align residential improvement plans with retail lease events and capital programmes.

Comment

Although the reforms introduce new obligations, they also offer an opportunity for retail property managers to professionalise residential management and enhance asset performance. Mixed-use schemes benefit when residential components are compliant, safe and well-run. Improved residential stability can enhance footfall, reduce reputational risk and create more attractive high-street environments.

Next Steps

The Renters’ Rights Act marks a decisive shift in the management of residential units within retail property portfolios. While the May 2026 changes require immediate operational adjustments, the longer-term stages such as database registration, ombudsman oversight, and Decent Homes Standard, signal a future in which residential compliance is a core management discipline rather than an ancillary concern.

Retail property managers who prepare early, embed strong governance and take advantage of the long lead-in time for building standards will be best placed to navigate the transition with confidence. If you would need advice in respect of any of the above, please contact us.

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