Friday, 3 July 2026
An unintended consequence of the UK’s Renters’ Rights Act 2025 could complicate the sale of private purpose-built student accommodation (PBSA), creating additional legal obligations for landlords that were not anticipated when the legislation was introduced.
The issue stems from changes that took effect on 1 May 2026, when qualifying PBSA developments were excluded from the assured tenancy framework. This exemption allows operators to continue offering fixed-term tenancy agreements aligned with the academic year and to collect rent in advance, provided either the landlord or its managing agent belongs to a government-approved code of practice.
However, legal specialists have highlighted that the change may inadvertently trigger provisions under the Landlord and Tenant Act 1987, which grants certain residential tenants a statutory right of first refusal when a landlord intends to sell a property.
Previously, most PBSA residents occupied assured tenancies and therefore did not qualify for these protections. As new student agreements are now structured as common law tenancies, many tenants could potentially become qualifying tenants under the 1987 legislation, provided the statutory thresholds are met.
If applicable, landlords intending to dispose of a student accommodation asset may first be required to offer the property to qualifying tenants before completing a sale to a third party. Failure to comply with these requirements can carry significant legal consequences, including criminal liability and the possibility that tenants could challenge or unwind the transaction.
The issue is expected to be particularly relevant for investment transactions involving operational student housing assets, where legal due diligence will now need to assess whether the right of first refusal applies before any disposal proceeds.
The legislation may also have wider implications beyond the student housing sector. Residential properties let to corporate tenants are also outside the assured tenancy regime because the tenant is a company rather than an individual. As some landlords increasingly consider corporate lettings following the introduction of the Renters’ Rights Act, those occupancies could also create circumstances in which the right of first refusal becomes relevant.
Industry advisers believe this outcome was not the intended effect of the legislation and expect sector bodies to seek clarification or amendments from the UK government. Until any legislative changes are introduced, owners and investors in purpose-built student accommodation are likely to take additional care when structuring acquisitions, disposals and portfolio transactions to ensure compliance with the existing legal framework.
Source: CMS
