From assured shorthold tenancies to assured periodic tenancies: What the Renters’ Rights Act 2025 means for Section 106 agreements

The Renters’ Rights Act 2025 (the “Act”), from 1 May 2026, abolishes Assured Shorthold Tenancies (“ASTs”) and resets the legal framework for assured tenancies in England as open-ended periodic tenancies. This change will impact historic planning obligations that were drafted on the premise that lettings would be granted as ASTs for fixed terms, a practice common in co-living and short-stay models. In broad terms, the Act “auto-corrects” Section 106 obligations so that references to ASTs are treated as references to assured periodic tenancies. However, there remain scenarios in which a proactive variation may be prudent or necessary, particularly where the specified term of an AST operated as a trigger for other obligations, allocations or management controls and may no longer be capable of functioning as intended. The extent of the knock-on effects of the Act in respect of Section 106 agreements remains to be seen. This article explains the position under the Act and also maps the circumstances in which action is recommended and the practical routes available to developers to regularise and future-proof Section 106 obligations.

The statutory starting point: automatic alignment of Section 106 obligations

What are the changes in practice? Under an AST, landlords commonly grant fixed terms for individual residential units, which either expire, or a new fixed term AST is entered into. Under the Act, those tenancies will be converted to open‑ended assured periodic tenancies i.e. rolling tenancies. From 1 May 2026, fixed terms for assured tenancies will be no longer universally available. This matters where Section 106 obligations provide for fixed term ASTs.

There are a few notable exceptions to this, including in respect of purpose-built student accommodation (further details are available in CMS’ previous Law-Now article here). Critically for planning, the Act contains targeted transitional arrangements for Section 106 obligations entered into before commencement of the Act, which for most of the changes will be 1 May 2026.

From the commencement date, the Act provides that:

• Section 106 agreements that required dwellings to be let on terms that would previously have been performed by an AST, or a form of assured tenancy, have effect as if they require letting under an assured periodic tenancy.
• In practice, references to a superseded tenancy are read across into the new statutory tenancy model. This preserves the planning intent, i.e. that specific housing is to be let, while eliminating legal impossibilities created by the abolition of fixed terms.
• The same approach applies where an obligation restricts particular actions unless or until a unit is let on a superseded tenancy. Those restrictions now operate by reference to letting under a relevant assured tenancy.
• Where an obligation already required, or permitted, a form of letting that remains available under the new regime, it continues to apply in those terms.

In practical terms, Local Planning Authorities (“LPAs”) should not enforce obligations requiring ASTs in a way that would compel unlawful grants of fixed term leases. Instead, the obligation should be read as requiring assured periodic tenancies.

When the automatic fix is not enough: scenarios that still call for a deed of variation or variation of other approved documentation

Although the Act “auto-corrects” references to ASTs, it does not rewrite the obligations around those references. CMS envisages a number of scenarios where further action may be required:

• Term-linked triggers that drive eligibility, allocation, or turnover assumptions. Many build-to-rent (“BTR”) Section 106 agreements contain intricately linked obligations, such as discounted allocations, eligibility criteria, restrictions on student occupation, or management and reporting cycles. A deed of variation may be required to update the AST provisions to refer to lawful tenancies and to reset any related allocation and management controls.
• Obligations devised to address fixed-term leases. Some obligations will be triggered once a unit has been let as an AST or after a certain number of such lets have completed. The Act updates the reference to the tenancy type, but not the milestones tied to fixed term completions. If the milestone was intended to evidence occupation patterns over time or to “bank” a specified number of ASTs, the mechanism may no longer function as intended. A targeted variation can replace such milestones under the periodic regime, preserving the original planning purpose.
• Management plans and embedded definitions. Where a management and tenure plan approved under a Section 106 agreement or planning condition embeds the AST associated definitions, it will no longer align with the Act. Because these plans are often enforceable under the agreement and are routinely reviewed by purchasers and lenders, it is sensible to update them to avoid technical inconsistencies, even if not strictly required.
• Severance clauses and enforceability risk. Many Section 106 agreements include a boilerplate severance clause that applies where a provision is illegal or unenforceable. Although the Act will automatically replace references to ASTs in Section 106 agreements with assured periodic tenancies, we have seen (above) a number of examples where this could still result in certain obligations being rendered “unworkable”. This could create uncertainty over whether the obligations fall away or remain enforceable. For transaction readiness and lender confidence, a deed of variation or a clear non-enforcement letter can close that gap.

Practical routes to regularise and future-proof Section 106 obligations

We are yet to see the full extent to which developers, LPAs and funders are expecting proactive steps to align planning obligations with the Act, although questions have started to be raised across the sector. The following is a list of potential measures which may be taken to address the impact of the Act, depending on the circumstances and the specific obligations impacted:

• Vary the Section 106 agreement by a deed of variation: This can delete the fixed term reference and re-express it by reference to lawful assured periodic tenancies and update related provisions, definitions and schedules. Where appropriate, it can also regularise any reallocation of units into the wider tenure pool or update discount and eligibility frameworks to reflect realistic occupation patterns under periodic tenancies. As a deed of variation binds successors and is registrable, it typically satisfies lender and purchaser diligence requirements and removes ambiguity at source.
   
• An authoritative non-enforcement letter from the LPA: Properly drafted, the letter can confirm the authority’s view that, following commencement, enforcing fixed term AST requirements would be unlawful and it can set out a non-enforcement position while any deeds of variation are progressed. Although such letters are not generally enforceable as a matter of law, they materially reduce practical risk, often satisfy counterparties as a bridge to formal variation and can serve as a helpful interim measure. Where the LPA supports the approach, the letter may also be used as a condition precedent or condition subsequent to a transaction.
   
• Amendment of the approved management and tenure plan: Where the Section 106 agreement allows for plan updates by agreement, aligning the plan with the assured periodic tenancy model and any revised allocation or eligibility designations can bring day-to-day operation into compliance and provide documentary comfort for due diligence, even if the core agreement is not formally varied.
   
• Explanatory notes for due diligence files: Where disposal or refinance timetables precede formal variation, a memorandum explaining the statutory read-across, the incompatibility of ASTs with the Act, and the authority’s non-enforcement position can assist counterparties to understand the statutory position and price any residual risk.

Patrick Fenlon: “We are generally seeing LPAs adopt a pragmatic, common‑sense stance on the inconsistencies created by the Act and its interaction with Section 106 agreements. Where existing Section 106 agreements refer to ASTs, LPAs are not seeking to impose unworkable outcomes, and in live negotiations, they are generally open to practical solutions. The takeaway for BTR developers and operators is to move early: review and flag any AST requirements in existing Section 106 agreements and identify whether there are any obligations or approved documents that may no longer be capable of compliance. Having a clear strategy and being transparent with lenders, purchasers and other key stakeholders will be valuable - enabling focused due diligence and more confident pricing.”

Key takeaways for developers

The Act’s transitional provisions do the immediate heavy lifting by converting AST-based letting requirements in historic Section 106 agreements into obligations framed by reference to relevant assured tenancies. That avoids legal impossibility and ensures the original planning intent is not frustrated by the new tenancy regime. However, where ASTs were used as a design tool to drive turnover, eligibility, allocation or reporting, you may need to take proactive steps to redraft obligations. In most cases, a deed of variation, coupled with updates to management and tenure plans, will provide a solution that binds successors and is aligned with market expectations under the Act.

This article was co-authored by Eleanor Addinall, Trainee Solicitor.