The Law of Unintended Consequences: Mixed‑Use Property and the Renters’ Rights Act 2026

Mark Rowlands, Senior Solicitor at Holmes & Hills, discusses Mixed‑Use Property and what the Renters’ Rights Act 2026 means for owners and occupiers.

We’ve all made decisions at some point in our lives which have caused the fabled “ripple effect” of unknown, far-reaching implications. The Renters' Rights Act 2026 effected the biggest change in rentals in a generation. Its purpose is to protect people who rent their homes, but its effects go wider than many property owners realise. Many commercial property owners and, indeed, practitioners, have not necessarily given the Renters’ Right Act 2026 as much thought as they might have… but mixed-use property owners are likely in for a shock!

To understand the issues, you first need to understand what a mixed-use property is: that is, simply and as the name suggests, a building that combines business and living spaces. Think of a flat above a shop, or a modern development with retail units on the ground floor and apartments above. These properties are popular with investors because they bring in income from both sides. However, the new law creates a split that makes them trickier to manage.

On the one hand we have the Renters Rights Act 2026 applying only to the residential parts of a building, whilst the commercial parts continue to be governed mainly by the Landlord and Tenant Act 1954.

How the Renters’ Rights Act 2026 Changes Residential Tenancies

So, in future, the new rules for residential properties, mean:

• No more "no-fault" evictions. Landlords can no longer use Section 21 to ask tenants to leave without giving a specific reason.
• Rolling tenancies become the norm. Fixed-term tenancies are replaced by open-ended (periodic) ones.
• Homes must meet the Decent Homes Standard: a set of minimum quality requirements covering things like insulation, ventilation, damp, and fire safety. This is to be transitioned in slowly becoming compulsory in 2035.
• Rent can only go up once a year. And only through a formal notice (called a Section 13 Notice).
• Properties must be registered. Landlords must list residential units on a new national Property Portal. The portal is likely to be ready later this year.   
• Tenants get a formal complaints process. Landlords must join the Private Rented Sector Ombudsman Scheme. Again, the scheme will be transitioned in slowly and is expected to become mandatory by 2028

Meanwhile, the shop or office downstairs? None of this applies. It keeps running under its existing commercial lease, with its own separate rules.

Key Challenges for Mixed‑Use Property Owners

Essentially, mixed-use property owners are about to own property having to utilise two sets of rules. Managing one building under two completely different legal systems is harder than it sounds, with the main headaches being:

1. Additional admin and compliance work whereby landlords may need separate record-keeping, different management processes, and possibly even different managing agents for the residential and commercial parts of the same building. Getting something wrong on the residential side, even accidentally, can lead to serious penalties.

2. Meeting the Decent Homes Standard could lead to significant spending on the residential units, i.e.., new insulation, better ventilation, damp-proofing, or fire safety improvements. When the work involves shared parts of the building (like the roof or communal hallways), it gets complicated: who pays what? Splitting costs fairly between residential and commercial tenants through service charges isn't always straightforward.

3. Commercial leases may need updating to make sure improvement costs are shared fairly. Insurance policies and premiums might also need to change to reflect the landlord's new legal responsibilities on the residential side.

Examples of How the Act Affects Real‑World Scenarios

Flat above a shop

This is the most common scenario. The shop lease carries on as before, but the tenant living upstairs now has much stronger legal protections. The landlord cannot simply ask them to leave by serving the previously common method of a s21 Notices. A landlord will now have to prove a specific legal reason to do so, such as planning to demolish and rebuild.

What about a common scenario whereby the commercial tenant rents the whole mixed-use property. The tenant then lets out the flat above to a residential tenant and obtains the rental income. How can the commercial tenant now guarantee handing back the property to the landlord with vacant possession at the end of the lease term. It seems it no longer can! Consider therefore how an existing yield up clause and / or break clause in a lease could be impacted by the tenant’s inability to provide vacant possession of the whole property! Although this is likely to be an issue for the commercial tenant, the landlord is likely to be affected because in practical terms it will be forced to take on a residential tenant that it has neither vetted nor has a relationship with. It is potentially messy.   

Live-Work Units

Some spaces are designed for people to both live and work in. The big question is: is it mainly a home, or mainly a workspace? If it's classed as residential, the full force of the new Act applies. Getting clear legal advice on how these units are classified is essential.

Large Mixed-Use Developments

In bigger buildings with many residential and commercial units, disputes over service charges become especially tricky. Residential tenants can complain through the Ombudsman or a tribunal, while commercial tenants use completely different and separate channels. The management company must keep both sides happy — under two different sets of rules.

Practical Steps for Mixed‑Use Landlords

So, what should landlords do? If you own or manage a mixed-use property there are some practical initial steps to be taken. For example, a sensible commercial landlord will be talking to its managing agent and surveyor with regards to the following: 

• Common sense dictates that the first step is to review your portfolio and identify those properties affected.
• Where possible look to update your residential tenancy agreements to ensure they reflect the move to periodic tenancies and remove any reliance on Section 21.
• When the Property Portal and the Ombudsman Scheme are finally up and running it would be sensible to get your residential units listed as soon as possible.
• It would be worth establishing in advance what work is needed under the Decent Homes Standards and how much it will cost. Although the Decent Home Standards may not become compulsory until 2035 it will pay to be ahead of the game.

There may be a requirement for an owner of mixed-use property, in conjunction with its managing agent, surveyor and solicitor to review and model the impact of the Renters Right Act 2026 on existing commercial lease provisions. For example, to ensure that service charge costs are split fairly between residential and commercial tenants. It may well be that the tenant will be adversely affected by the changing landscape, but where the tenant is unable to bear the costs involved, inevitably these will fall to the landlord. Having mapped out the likely impact of the Renters Right Act 2026 on the existing lease over the term it may well be sensible for a commercial landlord and commercial tenant to enter discussions to vary the lease.     

As always, the standard guidance is to seek professional advice early. A property solicitor, surveyor, and specialist managing agent can help you avoid expensive mistakes.

Mixed-use property may still be a sound investment, but the rules have changed. Landlords who get ahead of the new requirements will protect their buildings and their returns. Those who wait risk fines, legal disputes, and a lot of unnecessary stress.

How We Can Help

Holmes & Hills’ specialist commercial property team can help you understand how the Renters’ Rights Act 2026 affects your building, your tenants, and your long‑term investment strategy. Contact us today to discuss how we can assist you.