Build to Rent meets Build to Regulate

Most Build to Rent flats today are let on assured shorthold tenancies (ASTs). Operators have relied on Section 21 “no-fault” notices to manage turnover, refresh units, and reset rents. That flexibility has been central to the model. Yet the Renters’ Rights Bill, now close to Royal Assent, will abolish ASTs and Section 21. In their place comes a single system of open-ended periodic tenancies, with possession only on statutory grounds.

As of September 2025, ASTs and Section 21 remain in force, but change is expected in 2026. For Build to Rent, the impact is clear: no more easy turnover. Tenancies will become stickier, rents can only rise once a year on a statutory process, and tenants may challenge increases at the Tribunal. Income will be steadier, but less flexible.

Not every BTR agreement is an AST. High-rent tenancies (over £100,000 per year), short-stay licences, and company lets all fall outside the assured tenancy regime. Each carries its own rules, and careless drafting risks costly disputes. The era of one-size-fits-all agreements is over.

Planning obligations add further constraints. Many schemes are bound by Section 106 covenants requiring them to remain rental stock for 15 years, with clawback payments if units are sold earlier. Combine that with the new tenancy rules, and exit strategies need careful legal planning.

Tax is another brake. Rent from dwellings is VAT-exempt. That means no VAT charged on rent, but no recovery of VAT on land, fees, or many construction costs. A detail easily missed, but critical to viability.

The Building Safety Act imposes additional duties. Every higher-risk building must be registered with the regulator. The institutional landlord will be the Accountable Person, responsible for safety cases, golden-thread records, and resident engagement. Lenders will not refinance a block if liability for cladding or external walls is unclear.

Insurance matters too. Latent defects cover is now standard, demanded by funders as protection against structural failure. Without it, a scheme is not bankable.

The bigger picture is simple. Build to Rent began as a landlord-driven model, powered by ASTs and Section 21. The Renters’ Rights Bill pushes it towards tenant security. But the sector is not going away. With more than 136,000 homes completed and over 50,000 under construction, BTR is now mainstream. Institutional landlords may even benefit from being seen as the professional, compliant end of the rental market.

The Hound’s verdict: Build to Rent is a legal framework, not a sales pitch. Treat it with care, or the numbers will betray you

Charlie Davidson, The Hound of Holborn, is a Senior Associate in Bishop & Sewell’s Residential Property team.