UK Half-Year Real Estate Update (June 2026)

The UK real estate market has seen significant regulatory changes in the past six months, with further developments on the horizon. In this Sidley update, we cover

1. practical use of AI in real estate transactions

2. the Renters’ Rights Act 2025 — where are we now?

3. abolition of upwards-only rent reviews in commercial leases

4. the Building Safety Act 2022 and building liability orders: risks for investors

5. current consultations – commercial lease reform

6. register of contractual land control agreements

1. Practical use of AI in real estate transactions

The Sidley real estate practice has continued to invest in the latest AI tools developed for real estate lawyers. Our lawyers are trained to use these tools where they can add value and increase efficiency, particularly in the diligence process.

Key features:

(a) Advanced mapping functionality: This is particularly useful for portfolio transactions. We can share interactive maps with clients, to help them better understand a portfolio and support site visits (physical and virtual), valuations, and the wider underwriting process.

(b) Integrated title review: The latest platforms allow title information to be obtained and reviewed within the platform, resulting in faster and more efficient legal diligence.

(c) Bulk data extraction and review: We can obtain substantial portfolio title data within minutes, which can then be filtered and reviewed quickly. For many transactions we can use this information to obtain a portfolio title-wrapper insurance policy, avoiding detailed diligence entirely, potentially delivering significant cost and time savings.

(d) Certificates of Title: The latest agentic AI tools can assist with preparing, and importantly reviewing, Certificates of Title. The tools are specifically developed for real estate lawyers and incorporate human-in-the-loop oversight designed to support high-quality output. Use of these tools is not currently widespread among property lawyers, but we expect adoption to increase significantly over the next 12 months.

(e) Reporting: The tools can generate high-quality reports on real estate documents. These reports can be tailored to specific clients and projects and are particularly useful on large portfolio transactions, where vast numbers of documents can be reviewed and reported on quickly. Lawyers can then verify all, none, or some of the reporting, depending on the nature of the transaction and the client’s preference.

We have recently given presentations to a number of clients to demonstrate how Sidley is using AI in real estate transactions. These have been well received and have generated significant discussion. If you would like us to speak to you about this, please contact us here. 

2. The Renters’ Rights Act 2025 — where are we now?

Nearly two months have passed since the Renters’ Rights Act 2025 (the RRA) came into force on 1 May 2026, introducing the most significant reforms to the private rented sector in England in decades. The reforms have been widely publicised, so many readers will already be familiar with the following key changes:

• Fixed-term assured shorthold tenancies (ASTs) have been abolished and largely replaced with (or automatically converted into) rolling assured periodic tenancies. There are some exceptions to this, notably for purpose-built student accommodation (PBSA), which — if certain conditions are met — will move to fixed-term common-law tenancies.
• Tenants can terminate assured tenancies on two months’ notice. Landlords can no longer terminate at the end of the fixed term, as the previous “no-fault” Section 21 eviction route has been abolished. Landlords must now serve a Section 8 notice specifying a statutory possession ground under the Housing Act 1988 (as amended).
• Rents can be reviewed only once each year, and only up to the open market rent, following a statutory process. Tenants can challenge rent increases through the First-tier Tribunal (FTT). The FTT’s decision will not be backdated.
• Restrictions on rental bidding have been introduced, and landlords can no longer accept higher rents than advertised.
• Landlords are subject to enhanced anti-discrimination obligations — it is unlawful to discriminate against prospective tenants who receive benefits or have children.
• Tenants can keep pets with the landlord’s consent (not to be unreasonably withheld).

Key concerns raised so far include the following:

(a) Where landlords terminate an assured periodic tenancy under one of the prescribed grounds (e.g., due to nonpayment of rent or tenant breach), any dispute will currently need to be determined by the court system, however without further investment in court resources such disputes could take a long time to resolve.

(b) The fee for tenants to challenge yearly rent increases is low (around £50). Given the FTT’s decision will not be backdated, tenants have a strong incentive to challenge rent increases, even where those increases do not exceed the open market rental value.

(c) The reduction in flexibility for landlords may lead to fewer rental properties on the market, and that reduction in supply could increase rents to the detriment of tenants.

While the RRA reforms are significant, it will likely be business as usual for most investors in built-to-rent (BTR) schemes, who already view their tenants as long-term customers and invest in quality assets, partnering with operators that have strong and consistent operational and management capabilities. Despite the concerns highlighted above, investor appetite in the sector appears to remain strong, as shown by the sale by L&Q in June 2026 of its £1.05bn BTR portfolio.

The effect on the private landlord sector (already affected for years by tax changes and regulatory reforms designed to increase standards), and whether this leads to shorter or longer-term supply issues in the rental market more generally, remains to be seen.

Further measures are expected to be introduced pursuant to the RRA:

• Implementation of the RRA for the social housing sector, expected in October 2027 (currently the AST and Section 21 “no fault” eviction regimes continue to apply)
• Introduction of a Private Rented Sector Database in 2027
• Introduction of a Landlord Ombudsman scheme in 2028
  
  

3. Abolition of upwards-only rent reviews in commercial leases

The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026. The Act includes a ban on upwards-only rent reviews in commercial leases in England and Wales, which caught the real estate industry by surprise when it was included in the draft legislation in 2025. The policy was primarily driven by concerns about commercial retail leases. This is notable because retail leases are increasingly short term, often with no rent reviews, but the scope of the ban is much broader and will apply to essentially all commercial leases.

Key points to note:

• The ban applies to open market, index-linked, and turnover-based rent reviews. Stepped rents — or any other basis on which the reviewed rent is fixed or ascertainable at the date of lease grant — will not be caught.
• The ban is not yet in force and is unlikely to be introduced before 2027. This means that leases can, at present, still include upwards-only rent reviews.
• The ban will not generally be retrospective, and leases entered into pursuant to agreements or options entered into before the ban comes into force will not generally be caught. The key exception is where a lease (including a renewal) is entered into pursuant to an agreement or option entered into with an existing tenant and that agreement or option was entered into on or after 17 March 2026. In that case, the lease will be caught by the ban (unless it is entered into before the ban comes into force).
• We understand the government will consult on further details of the ban, in particular whether to permit collars on index-linked reviews (which would require secondary legislation).
• There is currently some doubt over whether a rent review based on the higher of two different reference amounts (e.g., indexation and market rent), each of which can move upwards or downwards, would be permitted. Indexation will rarely fall over a five-year period, so this could otherwise be an easy way to circumvent the purpose of the ban and may be addressed in the government consultation or any regulations.
• Because the ban is not yet in force, and further details of any consultation and regulations are awaited, standard form leases are not generally being updated. However, the effect of the upcoming ban should still be considered in most leasing transactions.
  
  

4. The Building Safety Act 2022 and building liability orders: risks for investors

Recent cases brought under the Building Safety Act 2022 (BSA) have cut through special purpose vehicle (SPV) and group structures by expanding liability for defective products to ‘associated’ entities. Even where the primary liable entity is insolvent, dissolved, thinly capitalised, or outside of the jurisdiction, liability can be redirected to ‘associated’ entities. This presents new risks to contractors, developers, manufacturers, and investors alike. Businesses involved in the construction and real estate industry must be aware of how to navigate the new regulatory regime.

Section 130 of the BSA introduced the concept of a building liability order (BLO). With a BLO, the High Court can hold associated body corporates jointly and severally liable for a relevant liability of another body corporate if ‘just and equitable’ to do so. 

The definition of ‘associate’ under the BSA is deliberately broad. Body corporates can be ‘associated’ with another if one controls the other or if a third party controls both. A ‘relevant liability’ — for which a BLO can be granted — is any liability under the Defective Premises Act 1872, Section 38 of the Building Act 1984 (damage suffered as a result of a breach of the Building Regulations), or as a result of a building safety risk. 

The High Court granted the first BLO in 381 Southwark Park Road RTM Company Ltd and others v Click St Andrews Ltd and another [2024] EWHC 3179 (TCC). In this case, the claimants obtained an award of damages due to defective works completed by the defendants (i.e., a building safety risk). However, the SPV that procured the relevant works later entered into liquidation. As a result, the High Court held that it was ‘just and equitable’ for the SPV’s parent company, Click Group Holdings, to be jointly and severally liable for the defective works — effectively piercing the corporate veil.

We expect that claimants will use BLOs in increasingly creative ways. For example, by seeking relief from associated companies for remedial works that may have been required by buildings developed or refurbished by larger ownership groups during historic periods of ownership. As shown by claims filed in the High Court this year, claimants are clearly already testing whether former owners and investor-side corporate groups (including associated companies) can be brought into BSA-based remediation claims.

A new concern for investors is that liabilities may no longer be isolated with the immediate project or trading company. Depending on fund structures, claimants may try to extend liabilities to sponsors or other portfolio companies where common control or special rights are shared. However, the end result must still be just and equitable. The viability of each claim will therefore depend on the facts and turn on a case-by-case basis.

The High Court’s interpretation of what is ‘just and equitable’ in each case creates uncertainty. Claimants will try to skew this for their own benefit and argue that the only just and equitable outcome is their desired allocation of liability. However, this uncertainty can also help funds and investors on the receiving end of claims. For example, it will be difficult for claimants to justify BLOs against unconnected portfolio companies. 

Claimants still face remaining barriers to action under the BSA. As a first step, claimants must identify an original body corporate with a relevant liability. If they try to obtain a BLO against other body corporates, claimants must also clearly demonstrate to the High Court how these associates are connected. Where developments involve a number of contracting parties and relevant fund structures are more complex, this can be difficult. An important aspect to any defence will therefore be a coherent explanation of the relevant fund structure, control rights, and why other portfolio companies do not fall under the ‘associate’ umbrella.

5. Current consultations — commercial lease reform

On 16 June 2026, the Law Commission published the following consultation papers relating to commercial lease reform in England:

• A long-awaited second consultation paper on reforming the security of tenure regime under the Landlord and Tenant Act 1954 (the 1954 Act). While security of tenure and the contracting-out process is set to be retained — so that the default position is that business tenants will have a statutory right to a new lease when the contractual term of their existing tenancy expires — the Law Commission is seeking views on the following areas in particular:
  
  

• increasing the lease term length from six months to two years before business tenancies can benefit from security of tenure
• simplifying the contracting out procedure, avoiding the need for separate statutory notices and declarations
• more flexibility for the court to order that more “modern” renewal leases are granted (e.g., leases with turnover rents)
• whether to simplify the process for determining interim rent
• whether the “Ground F” landlord possession ground (essentially, where the landlord wishes to carry out redevelopment works that require vacant possession) should allow landlords to bring properties up to minimum energy efficiency standards
• changing the basis of statutory compensation where the landlord has successfully opposed a lease renewal, moving from rateable value to compensation based on the current rent and the tenant’s length of occupation
• changing the dispute resolution forum, possibly to specialist courts or the tribunal system, with the aim of improving efficiency and decision-maker expertise

• A consultation paper on changes to the Landlord and Tenant (Covenants) Act 1995 (the 1995 Act) and the right of first refusal under the Landlord and Tenant Act 1987 (the 1987 Act). The Law Commission is seeking views on the following areas:

1995 Act

The 1995 Act was originally introduced to prevent original tenants, and landlords, continuing to be liable under leases long after they had been assigned or the building sold. The Act included anti-avoidance provisions for tenants’ benefit. However, in some situations these anti-avoidance provisions can cause practical problems.

For example, the guarantor of an outgoing tenant is prohibited from also guaranteeing an incoming tenant; however, there may be good reasons for entering into such a transaction, such as a group company reorganisation. Similar issues arise when transferring leases within partnerships. The Law Commission proposes the 1995 Act is amended to facilitate intragroup lease assignments, transfers within partnerships, and assignments from a tenant to its guarantor.

1987 Act

• The 1987 Act gives qualifying residential tenants a right of first refusal if their landlord proposes to dispose of all or part of its interest in the building to a third party. The landlord must first serve notices on the tenants, and failure to do so is a criminal offence.
• The legislation is often interpreted cautiously and can cause delays and additional cost, in particular where a building is mixed use and includes both commercial and residential. For example, if a landlord grants a lease of a commercial ground floor unit of a building that includes qualifying residential tenants, then the current view is that the landlord should first serve notices on the residential tenants, giving them a right of first refusal under the 1987 Act.
• The Law Commission propose that the grant of leases of premises which are exclusively occupied or used for non-residential purposes should not, in general, trigger the right of first refusal under the 1987 Act.
• This proposal is designed to preserve the core protection that the right of first refusal gives to residential tenants while reducing unnecessary procedural burdens for landlords and investors. The Law Commission believes this should help alleviate the current issues caused by the application of the 1987 Act to mixed-use buildings.

Both consultations close on 16 September 2026. Please contact us for further details or if you would like to discuss responding to either consultation.

6. Register of land control agreements

HM Land Registry records details of legal ownership of registered land in England and Wales but does not routinely record details of who controls, or has rights to acquire, such land. The Provision of Information (Contractual Control) (Registered Land) Regulations 2026 (the Regulations) were made on 8 June 2026 and introduce a new duty to provide prescribed information to HM Land Registry about rights contained in certain land agreements. These include options, pre-emption rights, conditional contracts to acquire land (except leases for a term of less than 15 years), and rights associated with promotion agreements, where these give a person the ability to control how land is used or developed. 

Restrictive covenants, overage agreements, rights relating to security for a loan agreement, and rights with a total period of control of less than 18 months are not caught.

The Regulations will come into force on 6 April 2027, but they will apply to agreements entered into from 8 June 2026, with a deadline of 6 October 2027 to provide details of such agreements to HM Land Registry. For agreements entered into after 6 April 2027, details must be provided to HM Land Registry within 60 days. 

Clients considering entering into such agreements from now on should therefore be aware that information will need to be filed with HM Land Registry. The information will include the parties to the agreement, the nature of the control right, the contractual period, and details of the land affected. Financial and pricing information does not need to be filed. HM Land Registry will also need to be updated whenever such agreements are assigned or varied, have expired, or been exercised or determined. The filing process is still to be confirmed, but further details are expected in the coming months.