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The Renters’ Rights Act 2025 (the Act) takes full effect on 1 May 2026 and so far, much of the commentary has focused on its impact on residential landlords.
This is with good reason, as the abolition of Section 21 and the move to open-ended periodic tenancies represent the most fundamental overhaul of the private rented sector in decades.
However, there is a category of property where the implications have received less attention – mixed-use buildings.
Where commercial premises, such as a shop, office or unit at ground floor, sit alongside self-contained residential accommodation above, there can be confusion about how the new rules are applied.
Owners and investors in these properties need to understand the specific legal complications that can arise.
The core problem
The Act applies only to residential tenancies that fall within its scope and commercial elements of a property should continue to be governed by commercial landlord and tenant law, including the Landlord and Tenant Act 1954.
At first glance, this separation might seem straightforward, but in practice, it is not.
The difficulty arises where a residential flat is included within the scope of a commercial lease, which is a common arrangement in retail properties where the business tenant also occupies the flat above.
Under the Act, the residential occupier of such a flat is entitled to the same protections as any other assured tenant, but the commercial lease itself does not fall within the regime.
Section 21 has been abolished entirely, which means there is now no procedural route to possession that does not require reliance on Section 8 grounds.
However, the Section 8 grounds, covering rent arrears and anti-social behaviour through to the landlord’s intention to sell, are designed for residential landlord-tenant relationships.
None of them apply cleanly to a commercial tenant occupying a flat as part of a commercial lease.
The result is that commercial tenants in this position can, in effect, become immovable from the residential element of their premises.
The practical implications for landlords and investors
For owners of mixed-use properties, the consequences are real and immediate. Vacant possession of a residential unit above a commercial property, something that might previously have been obtained through a Section 21 notice, could now become significantly more difficult or even impossible under the standard legal routes.
This has particular relevance for:
- Investors acquiring mixed-use assets who are planning to redevelop, refurbish or sell with vacant possession.
- Landlords renegotiating or granting new commercial leases where residential accommodation forms part of the demise.
- Lenders considering security over mixed-use buildings, given that more constrained possession rights may affect valuations.
The Act also brings enhanced obligations on property standards, enforcement powers for local authorities and a new national landlord register.
Even where the property is principally a commercial investment, if it includes a residential element, the compliance obligations attach.
How to manage the risk
There are practical steps landlords and investors can take now, with the most obvious being granting a standalone residential tenancy that sits alongside but outside the commercial lease.
This brings the residential tenancy clearly within the Act’s framework, ensures the landlord retains control of possession and reduces the ambiguity that arises when both elements sit within a single set of lease terms.
However, this may still create complications when trying to sell the entire development as one and you are seeking possession.
For existing arrangements, the key is to understand exactly what the lease provides and to take advice before a dispute arises or before any transaction completes.
If you own, are acquiring or are considering developing a mixed-use property, we can advise on how the Renters’ Rights Act applies to your position and the steps you should take to protect your interests, so .
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