From 1 May 2026, the Renters’ Rights Act 2025 will introduce significant changes to residential property licensing in England and Wales, extending liability beyond immediate landlords to include superior landlords such as freeholders and head lessees.

Under the current framework, penalties for operating an unlicensed property, including houses in multiple occupation, apply primarily to the party in control of the property or the one receiving rent. Enforcement mechanisms such as rent repayment orders can only be made against the immediate landlord.

This position was reinforced by the Rakusen v Jepsen ruling, in which the Supreme Court of the United Kingdom confirmed that superior landlords could not be held liable for such orders. The judgment acknowledged that this limited the effectiveness of enforcement, particularly where intermediary structures were used, but concluded that any extension of liability would require legislative action.

The new Act responds directly to that gap. It introduces criminal liability for any landlord holding a superior interest in a property that requires a licence but is not licensed. This applies regardless of how many intermediate leases exist and irrespective of whether the superior landlord was aware of the breach.

The offence is defined as one of strict liability, meaning that culpability does not depend on intent or knowledge. Liability arises solely from holding the superior interest in the property.

The changes are expected to affect a broad range of owners and investors. These include freeholders who have granted long leases, institutional investors using layered ownership structures, and owners of mixed-use schemes where residential units form part of a wider commercial asset. Even landlords without a direct relationship with residential occupiers may fall within scope if licensing requirements are triggered.

Corporate structures are also covered. Where an offence is committed by a company, directors may face personal liability if the breach occurred with their consent, connivance or as a result of neglect.

Sanctions for non-compliance are substantial. They include unlimited fines, civil penalties of up to £40,000, and rent repayment orders covering up to two years of rent. Local authorities are expected to use these expanded powers actively and may pursue enforcement against parties higher up the ownership chain, particularly where they are better resourced.

The legislation does provide limited statutory defences. A key defence is available where a superior landlord can demonstrate that all reasonably practicable steps were taken to ensure the property was properly licensed. However, relying solely on contractual provisions that restrict use or occupation will not be sufficient.

The introduction of the Act marks a shift in regulatory risk across residential property ownership structures. Landlords with any exposure to residential assets, including those within mixed-use portfolios, are advised to review their positions and ensure appropriate compliance measures are in place ahead of the May 2026 deadline.

Source: CMS