The Renter’s Rights Act 2025 (RRA) reshapes residential renting, but its quiet aftershocks are yet to hit mixed‑use sites where one commercial lease covers the whole property, and a residential flat is sublet. From May 1st 2026, both freeholders (the superior landlords) and commercial tenants (standing in as the intermediate residential landlords) face new rules, longer timelines and liabilities they may not expect.
For clarity: an ‘AST’ is an assured shorthold tenancy; post‑RRA, most ASTs become open‑ended ‘assured periodic tenancies’ (rolling tenancies with no fixed end date). ‘Vacant possession’ means getting the building back empty of people and belongings so works, sale, or reletting can proceed.
Conversion of ASTs: fixed terms out, rolling tenancies in
From May 1st 2026, most ASTs convert into assured periodic tenancies. The rent and other deal points broadly carry over, but the simple tactic of waiting for a fixed term to end no longer applies. Any eviction now relies on statutory ‘grounds for possession,’ which carry strict requirements; these requirements are unlikely to fit the landlord’s timetable.
All parties should review existing AST arrangements before May 1st 2026. Commercial tenants should assess which sublet tenancies will convert and brief contractors and lenders on potential impacts on the timeline. Superior landlords should request confirmation of all residential sublets and their current status, updating schedules accordingly.
New regulatory burdens: residential rules that bite commercial players
If a commercial tenant sublets the flat, it becomes a ‘residential landlord’ for that dwelling. That role brings responsibility. You must join a government-approved redress scheme (a mandatory complaints route for tenants) and register on the Private Rented Sector (PRS) Database. Miss either, and civil penalties follow, along with uncomfortable questions on refinancing and consents.
Standards tighten too: expect Decent Homes‑style requirements and quicker ‘improvement notices’ from the council—formal directions to fix hazards within set timescales. Those notices can be served on whoever is the flat’s landlord, not necessarily the freeholder. ‘Rent Repayment Orders’ (RROs) allow a tribunal to order up to a year’s rent back from a landlord after certain breaches; in some cases, this can reach a superior landlord.
Vacant possession: why getting the whole building back now takes two battles
Forfeiture of the commercial headlease no longer guarantees you can empty the building. If your tenant has underlet the flat and that sub‑tenancy has become an assured periodic tenancy, you—or whoever becomes the new landlord after forfeiture—must also complete the residential possession process. That means proving a statutory ground, serving the correct notice and, if required, getting a tribunal order. Timing rarely matches construction programmes or conveyancing timetables.
Tactics that help in the real world include robust information covenants to ensure the freeholder is kept ‘in the know’, clear step‑in and access rights to carry out works and comply with notices, and pre‑agreed vacant‑possession protocols that require the tenant to cooperate lawfully with the service of notices.
Keep the option to deal directly with the sub‑tenant for temporary relocations or surrenders without waiving rights against your tenant. Above all, make sure all stakeholders are aware of the new, longer timeframes.
When the intermediate lease ends, liabilities float upwards
If the commercial lease ends — by forfeiture, insolvency or surrender — responsibilities linked to the flat can jump to the freeholder. Improvement notices do not die with the lease; they follow the property and the new “landlord”. Some steps the former landlord took (like valid notices) can carry over, but so do their problems. Rent Repayment Orders may, in certain cases, be issued against a superior landlord, exposing investors to breaches committed by a lower landlord. Treat tenant compliance as part of covenant strength, not an afterthought.
Commercial tenants should ensure all regulatory obligations are discharged before lease expiry or surrender and provide full handover documentation to the superior landlord. Superior landlords should conduct thorough due diligence on outstanding improvement notices and RRO exposure when taking back property and build these risks into their commercial decisions.
Quick pointers
For commercial tenants who sublet flats, make sure you are ready to meet this new regulatory burden. You might be focused on your business under the same lease, but these provisions apply regardless. Rebuild your refurbishment and budget plans around the new possession timeline and remove any discriminatory wording from your underlease and policies.
For superior landlords, insist on timely underlet information and compliance certificates, hard‑wire step‑in, access and information rights at grant or renewal, and stress‑test vacant‑possession strategies where assured sub‑tenancies exist—tracking realistic best and worst dates. Make PRS/redress status, live notices, and any RRO history standard due diligence asks.
Conclusion
The RRA’s residential reforms now drive commercial outcomes. In mixed‑use buildings with residential underlets, expect longer possession paths, heavier compliance and liabilities that travel upwards. Treat residential management as a board‑level risk—and plan for vacant possession as a project, not an event.
