The impact of the Renters’ Rights Act on landlords and lenders

In the last of his weekly series of articles considering the big issues currently affecting the real estate sector ahead of his visit to MIPIM next week, Darren Hamer (Head of our Manchester Real Estate team) considers the impact of the Renters’ Rights Act on landlords and lenders in the private rented sector.

Introduction

The Renters’ Rights Act 2025 (much of which began life as the previous government’s unfinished Renters’ Reform Bill) represents the most significant overhaul of the private rented sector in England since the Housing Act 1988. While the legislation is framed as a measure to improve security and standards for tenants, it has far‑reaching consequences for landlords, lenders, receivers and investors. This article considers the impact of the Act on asset management, enforcement, income stability and lending risk.

Key structural changes

Abolition of section 21 and fixed‑term tenancies

From 1 May 2026, assured shorthold tenancies (ASTs) will be abolished and replaced with assured periodic tenancies. Section 21 ‘no‑fault’ evictions will no longer be available. All existing ASTs will automatically convert into periodic tenancies, and landlords will only be able to recover possession by relying on statutory grounds under section 8 of the Housing Act 1988. Fixed terms will have no legal effect.

Impact on landlords

Reduced flexibility and control

The removal of section 21 significantly limits a landlord’s ability to recover possession for strategic or commercial reasons. Even where a landlord intends to sell or occupy the property, possession must be sought under specific statutory grounds, many of which cannot be used in the first 12 months of a tenancy and require extended notice periods. This increases reliance on the court system and reduces landlords’ ability to manage portfolios dynamically.

Increased reliance on section 8

All possession claims will now require court proceedings. Although the Act expands and refines section 8 grounds, the process is slower, more evidentially demanding and exposed to court backlogs. This increases cost, delay and litigation risk, particularly for landlords with highly leveraged portfolios.

Restrictions on rent and income management

Rent increases will be limited to once per year and must be implemented using the statutory section 13 procedure. Rental bidding wars are banned, advance rent payments are restricted, and tenants may challenge rent increases at the First‑tier Tribunal. These measures reduce income predictability and landlords’ ability to respond quickly to market conditions.

Increased regulatory and compliance burden

The Act introduces a more interventionist regulatory framework, including a mandatory Private Rented Sector Database, compulsory membership of a Landlord Ombudsman, and the extension of the Decent Homes Standard and Awaab’s Law to the private rented sector. Civil penalties for serious or repeated non‑compliance may reach £40,000.

Impact on lenders and secured finance

Valuation and loan‑to‑value considerations

Longer possession timelines and reduced rental flexibility may depress values and increase arrears and void risk. Lenders may respond by tightening underwriting criteria, increasing pricing, or requiring additional security where properties are let on assured periodic tenancies.

Enhanced due diligence requirements

Compliance with registration, property standards and tenancy requirements will be critical. Non‑compliance may prevent lawful letting, directly affecting income streams and the value of secured assets.

Slower and less certain enforcement

The abolition of section 21 materially affects enforcement strategy for lenders, receivers and mortgagees in possession. Vacant possession will no longer be achievable via a no‑fault route, increasing enforcement timelines, legal costs and uncertainty of recovery, particularly in development and short‑term lending scenarios.

Conclusion

The Renters’ Rights Act 2025 represents a structural rebalancing of the private rented sector. For landlords, it reduces flexibility, increases compliance obligations and places greater reliance on the courts. For lenders, it introduces longer enforcement timelines and heightened risk around recovery and valuation. Both landlords and lenders should be reviewing documentation, enforcement strategies and financial models well in advance of the May 2026 implementation date.

HD at MIPIM

We’re counting down to Cannes and can’t wait to be back at MIPIM 2026!

An 11-strong team from across our UK offices will be attending, bringing together expertise in real estate, real estate finance, banking, construction and private client law.

We’d love to catch up with fellow professionals, have some great conversations and see how our legal expertise can help support your strategic goals. If you’re heading to MIPIM too, do get in touch.