Summary
There is an unintended consequence of the Renters’ Rights Act 2025 (“RRA”) for tenancies of private purpose-built student accommodation (“PBSA”).
PBSA’s exemption from assured tenancy framework
PBSA, meeting certain criteria, is exempt from the assured tenancy framework under the RRA, so that, from 1 May 2026, landlords can grant students common law tenancies that have fixed terms aligning with the academic year and rent can be taken in advance. The exemption is contingent on either the landlord or its managing agent being a member of a Government-approved code of practice (currently ANUK/Unipol and UUK). Please see here for further details.
The unintended consequence
The unintended consequence relates to tenants’ right of first refusal under the Landlord and Tenant Act 1987 (“1987 Act”). The effect of this right is that if the relevant statutory qualifications are satisfied, a landlord, who intends to make a relevant disposal (such as a sale) of its interest in particular premises, is first required to offer qualifying tenants of flats in the premises the right to acquire that interest, before disposing of it to a third party. The consequences of non-compliance with the right of first refusal are serious. If landlords do not comply (and do not have a reasonable excuse), they commit a criminal offence and tenants are given various rights that enable them to investigate and potentially unravel the disposal.
Not all residential tenants will benefit from the right of first refusal, so for example a tenant with an assured tenancy (such as an assured shorthold tenancy or, post 1 May 2026, an assured periodic tenancy) is not a qualifying tenant and does not benefit from the right of first refusal. The statutory qualifications include that the qualifying tenants in the relevant premises must, between them, own at least two flats in the premises, and the number of flats held by those tenants must exceed 50% of the flats in the premises.
Prior to the RRA, most PBSA tenancies were assured tenancies and therefore the tenants were not qualifying tenants and did not benefit from the right of first refusal. Since the RRA now exempts PBSA from the assured tenancy framework, new PBSA tenancies are “common law tenancies” (rather than assured periodic tenancies) and the unintended consequence is that the tenants potentially benefit from the right of first refusal.
This means that a disposal of PBSA which prior to the RRA would not have been affected by the right of first refusal may now be impacted by the right.
This appears to be an unintended consequence of the RRA and we understand that industry bodies will be reaching out to Government to highlight the concern.
Residential tenancies granted to companies
A residential tenancy granted to a company cannot be an assured tenancy (under the Housing Act 1988 the tenant has to be an individual) and, therefore, will be a common law tenancy, meaning that the company may benefit from the right of first refusal. Following the RRA, landlords may be more likely to grant residential tenancies to companies to avoid the impact of the RRA. The flipside is that the company will potentially benefit from the right of first refusal. While corporate tenants of residential space have previously had the potential to benefit from the right of first refusal, this will in future become more of an issue for landlords with the increased likelihood of companies being granted residential tenancies.
Comment
It seems unlikely that Parliament intended that PBSA tenants could benefit from the 1987 Act right of first refusal. However, that is the current position and landlords considering disposing of PBSA need to analyse carefully whether their disposal is caught by the 1987 Act. It is hoped that further legislation is enacted to resolve this unintended consequence of the RRA (amending section 3 of the 1987 Act as to who is a qualifying tenant). Landlords also need to be alert to where there are corporate tenants of residential tenancies who may benefit from the right of first refusal.
