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This legal update outlines the final form of the soon-to-be-passed Renters' Rights Act 2025 which was agreed by Parliament on Wednesday (22 October 2025). It brings the Government a step closer to fulfilling its manifesto commitment to reform the private rented sector (PRS). Although it is still awaiting royal assent, we know know what will be in the Act. While not all reforms will come into effect immediately and some will require secondary legislation to flesh out the detail, change is imminent.
The legislation will significantly impact the market, influencing investment appetite and operational dynamics.
In this article we break down what investors and operators in the Living sector need to know to successfully navigate this new regulatory landscape.
Moving away from fixed term residential leases: what landlords and tenants need to know
One of the notable reforms is the abolition of most fixed term assured tenancies.
Assured shorthold tenancies (ASTs), which have been the backbone of the residential occupier market, will no longer exist. Instead, with a few exceptions, tenancies will become periodic, affecting both future and existing agreements. Tenants will have the right to stay in their properties indefinitely, provided they give two months' notice before leaving. Landlords, on the other hand, can only evict tenants by proving an eviction ground.
This change presents challenges for landlords who will no longer be certain how long their tenants will stay. In theory a tenant could stay for only two months, although landlords will hope that having gone to the trouble of finding a property and dealing with reference checks, tenants won't want to move often.
Tenant turnover will be of particular concern to Build to Rent (BTR) operators if tenants treat properties like short-term accommodation.
Although the aim is to provide greater security for tenants, there may be some unintended consequences for them. There is a risk that landlords might shift towards short lets, replacing much-needed permanent homes with holiday lets. This may lead to increased rents due to fewer homes being available to let. Some tenants would prefer the certainty of a fixed term because of their personal circumstances, for example being close to a school, with no risk of a landlord being able to get possession back earlier than anticipated if they can.
There are nuances around student accommodation where there will be different types of tenancies depending on the nature of the property and identity of the landlord.
Broadly speaking, the intent is that leases granted after the relevant provisions are in force by educational institutions and government approved providers of purpose-built student accommodation (PBSA) will be common law tenancies unaffected by the RRA. All other student accommodation leases will be assured tenancies within the reforms of the Act.
However, there are bespoke possession grounds for some student leases which are assured tenancies and a full analysis of the basis of occupation will be needed. The transitional arrangements for student leases which have already been completed are complicated. Some landlords will need to act quickly once the relevant provisions are in force to ensure they can rely on the dedicated student possession ground.
Whilst much of the detail is left to secondary legislation, especially around PBSA, there are still a few unknowns.
We will explore the complexity of the effect on student accommodation in a separate article.
Eviction rules and possession grounds: new requirements for landlords
Currently landlords can use s21 of the Housing Act 1988 to evict tenants without having to specify a reason. The RRA abolishes these "no-fault" evictions, requiring landlords to prove a ground for possession. This is likely to lead to longer and more costly court proceedings.
There are concerns that the already overburdened court and bailiff enforcement systems will struggle to handle the increased case volume leading to serious delays. The prospect of having a judgment made against them may deter tenants from challenging legitimate evictions, but it is possible that some tenants may use challenges as a delaying tactic.
The RRA overhauls possession grounds and, given the abolition of s21 evictions, these grounds will have even greater significance.
In terms of eviction for non-payment of rent, a tenant must have at least three months' arrears at the time of both the eviction notice and the possession hearing if the landlord is to rely on the mandatory rent arrears ground. Tenants will continue to be able to avoid evictions by making partial payments just before the hearing.
Although landlords can regain possession if they want to sell the property or if they or a close family member wants to occupy it, they cannot to do so in the first year of the tenancy and won't be able to relet the property for a further 12 months.
Some commentators have noted that these provisions could be subject to challenge on the grounds that it infringes a landlord's right to enjoy peaceful possession of their property and possessions. The restriction on reletting the property for a year is meant to deter unscrupulous landlords from abusing the ground.
However, if circumstances change, for example if a sale falls through, it will mean that at a time when housing in the area may be scarce, properties must be left vacant, denying a willing tenant a property and possibly pushing up rents in the area. Shared ownership leaseholders will be relieved that this prohibition on reletting will not apply to them provided they comply with certain conditions.
Senior Living providers will be disappointed that the rent-to-buy possession ground is only available in the social housing context having lobbied to have it extend to integrated retirement communities. Many offer rent-to-buy contracts where an AST is granted to an older person which ends by consent when the purchase completes. This is useful where customers want to move quickly into a retirement setting for care reasons but are still waiting to sell their home or who want to "try before they buy".
Rent and payment rules
To address perceived exploitation in the market, the RRA introduces several measures:
Rent increases are limited to once a year with two months' notice and tenants can challenge increases above market rates. This includes challenging the initial rent within the first six months. Because any increase will be delayed until after the challenge has been resolved and will not be backdated, tenants will have every incentive to challenge increases, particularly if, as expected, there are long delays in dealing with challenges. To address this concern MPs agreed a compromise whereby regulations may be made in the future to backdate rent – this will be of limited comfort to landlords.
Except for some social housing tenancies, rent review clauses can no longer be used – landlords will need evidence of the rent the property would have achieved if newly let. All investors expecting a fixed annual rent increase from their assets will be concerned by this change.
There will be additional concerns for some asset classes. For example, integrated retirement communities are services led – they incorporate wide-ranging and comprehensive services and facilities, and rent is typically higher than for mainstream housing. Rent may also subsidise the cost of providing services such as meals so that rent is not related to changes in local average rents in general housing. On top of that, the integrated retirement communities sector is small and geographically spread so that there may not be rent comparables in the local area.
While there has been much focus on the effect on landlords, tenants may be adversely affected by the end of rent review clauses – they may find it difficult to budget and in the medium to longer term market increases could be higher than inflation linked reviews.
Lenders will also be concerned about this change – reduced certainty about rent levels could make it difficult for borrowers to service their debt, potentially increasing default risk.
Letting adverts must include an asking price and landlords and agents cannot accept bids above this price to prevent bidding wars. This may lead to landlords asking for inflated rents, tenants offering less and the landlord accepting the highest underbid. Landlords will need to weigh up the risk of this – a rent which a tenant thinks is too high may be accepted and then immediately challenged. The reform does not address the reason for bidding wars – lack of supply.
Improving housing standards in the PRS
Driving up living standards is another key aim of the RRA.
It does this by extending the Decent Homes Standard to the PRS with the aim of ensuring that properties are free from serious hazards and are in a good state of repair.
Landlords must address hazards like mould and damp within specific timeframes.
Ending discrimination in tenant selection
It will be unlawful for landlords and agents to discriminate against tenants based on their receipt of benefits or family status.
It does not mean that landlords can no longer consider how likely it is that a tenant can afford the rent when deciding whether to accept a tenant. Given that tenants can stay indefinitely and the restrictions around rents, landlords may be even more stringent in their rent affordability checks.
Rights and responsibilities around pets in rented homes
Tenants will have the right to request to keep a pet, and landlords cannot unreasonably deny such requests. Plans to expressly allow landlords to refuse consent unless pet insurance was put in place or an additional deposit paid were dropped.
New registration and dispute resolution bodies for landlords
To enhance accountability and transparency, landlords will have to register with a new PRS database once it is up and running.
Initially limited information will be required to be logged but the intention is that it will eventually be a "one stop shop" for landlords to access guidance, provide information for tenants and allow councils to monitor data about the sector.
Local authority licensing schemes already present challenges for example to large BTR schemes where each apartment requires a licence even though the apartments are almost identical. Not only is this expensive but creates a significant administrative burden. The RRA does not set out how licensing will work alongside the new portal and existing problems in the regime have not been addressed.
An independent PRS Ombudsman will be established to resolve landlord and tenant disputes, reducing the burden on courts. Again, it will be mandatory for landlords to register. There has been speculation that to quickly and easily set the service up, it may be merged with the current Housing Ombudsman Service (HOS). The HOS has a wealth of experience in dealing with tenant disputes and has some relevant procedures already set up. However, its expertise is in the social housing sector, not the PRS. There is also no clarity on how they will deal with a massively expanded remit. Because the detail is left to secondary legislation, exactly how the new ombudsman will integrate into the current and future regulatory framework is not clear.
Penalties and enforcement: what happens if you break the rules
The Act introduces a carrot and stick approach to enforcement.
Initial or minor infractions may result in fines of up to £7,000. For more severe or repeated violations, the penalties could escalate to fines as high as £40,000 or even result in criminal prosecution. Some breaches, like failure to register with the new database or ombudsman, will prevent a landlord from being granted a possession order should it seek to evict their tenant.
The Act also broadens the circumstances in which rent repayment orders (RROs) can be made and allows them to be made against complicit company directors in their personal capacity.
What next for the private rented sector?
The Act undoubtedly provides opportunities to enhance professionalism and standards within the sector. However, it also presents challenges for landlords and investors, particularly in terms of compliance and operational adjustments.
While measures to ensure renters can enjoy their homes are welcome, it is crucial to strike a balance that does not deter investors. Such deterrence could lead to a reduction in available homes and an increase in rental prices.
Reform of the PRS has been talked about for so long that there has understandably been frustration about the length of time it will have taken for the statute to finally make the books. However, the Act will represent a major change which may well result in unintended consequences and a period of adjustment before the market adapts.
Read the original article on GowlingWLG.com
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