The Renters' Rights Act in the Real World of Leasehold Transactions

Stephanie Hughes

Business Analyst / Underwriter

The Renters’ Rights Act is often talked about as an AST (Assured Shorthold Tenancy) focused reform. But for conveyancers it shows up in the day-to-day reality of leasehold transactions, where new statutory rules don’t always sit neatly alongside existing long lease terms. 

The key issue isn’t that the Act suddenly creates lots of new title defects. Instead, it creates compatibility problems.  

Most long leases were drafted on the assumption that fixed-term ASTs would remain standard practice. Long leases commonly include detailed provisions for controlling underletting: requirements for fixed terms, limits on occupancy length, restrictions on pets, and conditions around who may occupy.

These used to be workable in a standard lettings market but in a system built around periodic tenancies and stronger tenant security, those same clauses may now be impossible for landlords to comply with. 

For example, if an existing long lease requires no pets but now the Act requires pets to be allowed on an AST, where does that leave the leasehold owner trying to rent out their property?  

This issue rarely presents as obvious title defect. The risk emerges only when you look at how the property has been used, how it will be used, and how the long lease terms interact with the existing AST tenancy agreement and regulations.  

Getting a lease variation for the long lease is one option, but if the landlord is absent then there is no one to agree to the variation. Even if the landlord is present, lease variations can be costly and time consuming with all involved parties needing to agree. We’ve seen some landlord reluctance since the landlord may be under obligations not to agree to alterations or they may be subject to requirements that all leases remain in substantially the same form.  

Where a property is sold subject to an existing AST tenancy, or where vacant possession is required, recovering possession may take longer and carry more uncertainty, which can be unsettling for buyers and lenders. If vacant possession cannot be secured when needed, the transaction may not proceed.  

Legal Indemnity insurance does not cover ongoing statutory compliance, future tenant conduct, or the commercial consequences of an inability to obtain possession. It is more likely to respond to absent landlord issues and/or clearly defined historic breaches of private long lease covenants where enforcement risk is low and identifiable. Even then, underwriting will be careful and fact-specific. 

It is certainly an interesting topic and one we will be paying close attention to over the coming months.