Mixed-use Property: What the Renters’ Rights Act Means for Buyers and Sellers

In summary: If you own, buy or sell a mixed use property, such as a shop or office with a flat above, the Renters’ Rights Act changes how you can recover possession of the residential part from 1 May 2026. Section 21 no-fault evictions are gone. Here is what that means for your transaction.

Much of the commentary on the Renters’ Rights Act 2025 has focused on its impact on residential landlords and tenants. That focus is understandable, but it risks overlooking a group of property owners and investors for whom the changes are equally significant: those dealing with mixed-use properties.

If you are buying, selling, letting or considering investment in a property that combines commercial use with a separate residential tenancy, such as a ground floor shop or office with a flat above, the Act introduces changes that need to be understood and factored into how you approach the transaction.

For the private rental sector, the key provisions of Phase 1 come into force on 1 May 2026. For anyone involved in a mixed-use transaction right now, or planning one, there is no time to lose in understanding what has changed.

What Has Changed Under the Renters’ Rights Act?

The Act abolishes assured shorthold tenancies (ASTs) and, with them, the Section 21 ‘no fault’ eviction process. From 1 May 2026, all new and existing residential tenancies become periodic assured tenancies. A landlord can no longer end a tenancy simply by serving notice and waiting out the prescribed period without giving a reason.

To recover possession, landlords must now rely on specific grounds under an amended Section 8 of the Housing Act 1988. Those grounds include situations such as the landlord wanting to sell the property, wishing to move in a family member, or the tenant being in serious arrears. Each ground has its own notice requirements, thresholds and procedural steps.

The effect is a material shift in the balance of power. Where a residential tenancy is in place and the tenant is not at fault, recovering possession has become considerably harder and slower. For a residential landlord managing a buy-to-let portfolio, this is a significant change. For a commercial property owner or investor who has a residential tenancy running alongside a commercial element, it can be an unexpected complication.

Fixed term tenancies will be banned and all tenancies will become rolling or periodic tenancies, which means tenants will be able to stay in the property until they choose to end the tenancy or until a landlord serves a valid notice, as referred to above.

Rent increases will be restricted and the review process must follow a prescribed procedure as set out in the Act.

For most tenancies that started before 1 May 2026, tenants must be provided with the government-produced information sheet and if the tenancy was a verbal agreement, then a written record of specified terms must also be provided. For any new tenancies starting on or after 1 May 2026, certain information about the tenancy must be given to the tenants in writing. This can be included in the tenancy agreement itself.

Discrimination against renters who have children or receive benefits will be illegal and landlords will not be able to unreasonably refuse permission to a request from a tenant to keep a pet at the property. These obligations will, subject to certain caveats and conditions, override restrictions in mortgage conditions, insurance provisions and superior leases and will need careful consideration.

Why Mixed-Use Properties Deserve Particular Attention

Mixed-use properties sit across the boundary between the commercial and residential regimes. The commercial element, whether a retail unit, office or workshop at ground floor level, is governed by commercial landlord and tenant law. The residential element, if let separately in the private sector, will be subject to residential tenancy law.

Before the Act, if the residential accommodation was let on an AST, an owner who needed vacant possession of the whole building, whether to sell, redevelop, or simply restructure the use, could serve a Section 21 notice and recover the residential element with relative predictability. That route is now closed.

This matters in a number of specific scenarios that arise regularly in commercial property transactions.

Buying a Mixed-Use Property

If you are acquiring a mixed-use property and there is a residential tenancy in place over any part of it, the due diligence process needs to go further than simply reviewing the tenancy agreement.

You need to understand what ground, if any, would be available to recover possession of the residential accommodation, and on what timeline. If your business plan assumes vacant possession of the whole building at some point, you should take advice before exchange on whether, and how, that could be achieved. Assuming you can simply give notice and wait out a period no longer reflects the legal reality.

You also need to consider what obligations attach to you as incoming landlord from the moment of completion. The Act introduces new obligations and restrictions around rent increases, repairs under Awaab’s Law, and registration requirements that are being phased in. Understanding what you are taking on is an essential part of the transaction.

Selling a Mixed-Use Property

If you are selling a mixed-use property with a residential tenancy in place, you should expect buyers and their solicitors to scrutinise that tenancy more carefully than they might have done previously. The inability to serve a Section 21 notice changes the risk profile of the asset.

Sellers should be prepared to provide full documentation on the tenancy from the outset: the tenancy agreement, any deposit protection certificates, rent history, any correspondence with the tenant, and details of the current condition of the residential accommodation. Sellers will also need to confirm that they have provided tenants with the requisite information sheet prescribed under the Act before 31 May 2026. Gaps in this documentation will cause delays and may affect the price achieved or the pool of buyers willing to proceed.

If you are thinking of selling and there is a residential tenancy running, it is worth taking advice at an early stage on whether any of the available Section 8 grounds might apply and, if so, whether it makes sense to pursue possession before marketing. That decision depends on your circumstances, the strength of the ground and the likely timeline, but it is better explored before heads of terms are agreed rather than halfway through a transaction.

Granting a Lease of a Mixed-Use Property

If you own a mixed-use building and are considering granting a commercial lease of the whole, or structuring a letting arrangement that includes the residential accommodation, the position of any existing residential tenant needs to be resolved before you proceed.

A commercial tenant or investor taking a lease of a mixed-use property will expect clarity on the residential element. They will want to know whether the residential accommodation is occupied, on what terms, and what their options are if they need the space. If those questions cannot be answered clearly, the letting may be difficult to complete or may require a price adjustment to reflect the uncertainty.

There are also structural questions to consider when drafting the lease itself. How are the commercial and residential parts of the building defined and separated? What obligations does the tenant take on in relation to the residential accommodation? Are there clauses that address what happens if the residential tenancy ends or a new one is created during the term? These are not new questions, but the Act gives them fresh urgency.

The Practical Message for Anyone Dealing in Mixed-Use Property

The Renters’ Rights Act has not made mixed-use properties unmarketable or uninvestable. What it has done is increase the importance of understanding exactly what residential tenancy arrangements are in place before proceeding with any transaction involving such a property.

For buyers, that means thorough due diligence on the residential element as part of the wider conveyancing process, not as an afterthought. For sellers, it means being well prepared and transparent from the outset. For those structuring investment transactions or granting leases, it means giving careful thought to how the residential and commercial elements interact, and taking advice on how the transaction documents should reflect that.

The starting point in every case is the same: find out exactly what agreements are in place over the residential accommodation and understand what those agreements mean under the law as it now stands.

How Paris Smith Can Help

Kerry Houston-Kypta and the Paris Smith commercial property team advise on a wide range of transactions involving mixed-use properties across the South Coast, including acquisitions, disposals, lease structuring and property finance. If you are involved in a transaction where the impact of the Renters’ Rights Act on a residential element is a concern, we can help you understand the position and plan accordingly.

To discuss your situation, please contact Kerry Houston-Kypta on 01202 086093 or by email at Kerry.Houston-Kypta@parissmith.co.uk.

Frequently Asked Questions

1. Does the Renters’ Rights Act apply to commercial properties?

Not directly. The Act governs residential tenancies. However, if a commercial property includes a residential element that is let under a separate tenancy, that residential tenancy may be caught by the Act. This is particularly relevant for mixed-use properties such as a shop or office with a flat above.

2. Can I still recover possession of a residential flat above my commercial premises?

Yes, but the process has changed. Section 21 no-fault evictions are no longer available. You must instead rely on one of the prescribed grounds under Section 8, such as wanting to sell the property or serious rent arrears. Each ground has specific requirements and notice periods. Taking legal advice before serving any notice is strongly recommended.

3. I am buying a mixed-use property with a tenant in the flat. What should I check?

You should check the prescribed information sheet has been correctly issued to the tenant, review the tenancy agreement carefully, confirm that any tenancy deposit has been properly protected, check the rent history and condition of the accommodation, and take advice on what grounds might be available to recover possession if needed. Your solicitor should be raising these questions as part of the due diligence process.

4. Does the Act affect the commercial part of a mixed-use property?

No. The commercial element remains governed by commercial landlord and tenant law, including the Landlord and Tenant Act 1954 where applicable. The Act only affects the residential accommodation where there is a separate tenancy agreement in place.

5. When did the Renters’ Rights Act come into force?

Phase 1 of the Act comes into force on 1 May 2026, applying to all new and existing private sector residential tenancies in England. Further phases covering additional provisions including compulsory database registration and an Ombudsman are expected in late 2026, with Phase 3 dates to be confirmed following further consultation.

About Kerry Houston-Kypta

Born in Poole and having lived and worked across the BCP area for most of her career, Kerry has a deep understanding of the local property market and the legal complexities that arise within it. With over 22 years’ experience as a commercial property solicitor, she advises investors, developers and landlords on acquisitions, disposals, lease negotiations and property finance across the South Coast. Kerry provides commercially focused advice designed to move transactions forward efficiently and with as few surprises as possible.

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