UK real estate: What’s on the horizon for 2026?

The year ahead presents both opportunity and challenge as a broad range of legal developments will reshape the UK real estate sector. Despite political pressures at home and wider geopolitical tensions, there is optimism about the future, underpinned by recent falls in interest rates and pent-up demand across asset classes. Effective decision-making and risk management will depend on a clear understanding of complex legal changes. In this update, we consider the key issues that investors, occupiers and developers will need to navigate in 2026.

Living Sector

The implementation of the Renters Rights Act 2025 will have a significant impact on Build to Rent (BTR) and Purpose-Built Student Accommodation (PBSA). The Act received royal assent in 2025 but most of it is not yet in force. The government published its roadmap for reform at the end of last year, stating that the Act will be brought into force gradually in three phases over a period of 10 years. The new tenancy regime will be introduced on 1 May 2026 with all existing ASTs automatically converting to assured periodic tenancies with no fixed term (giving tenants security of tenure).  

The government has published resources for landlords and landlords can register for alerts notifying them of any new publications. Most BTR operators are already well informed and well prepared for these changes. However, at the time of writing, we are waiting for the government to publish (i) the prescribed wording that must be included in all new tenancies from 1 May 2026 and (ii) the information sheet that must be given to tenants with existing tenancies. We also await further details about the exemption for PBSA tenancies, as the Act requires the government to make additional regulations before this exemption is fully effective. 

In last year’s update, we reported on the Freehold and Leasehold Reform Act 2024. Although this Act received royal assent on 24 May 2024, most of it is still not yet in force. This Act focuses on long residential leases and includes a ban on new leasehold houses, subject to certain exceptions such as retirement housing, and new rules affecting leasehold service charges, freehold estate management charges and property sales information. Developers have an opportunity to influence policy by contributing to the government’s consultation on Enhanced protections for homeowners on freehold estates which is open until 12 March 2026.

Will 2026 be the year that introduces a ban on the sale of new leasehold flats? This is unlikely, given the slow progress on the proposed Commonhold Bill. The draft bill that was promised in 2025 has not materialised and there have been no significant updates since the publication of the Commonhold White Paper over 10 months ago. The government’s ambition to make commonhold the default tenure therefore remains aspirational rather than imminent.

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Building Safety

We expect further significant building safety developments, with the Building Safety Levy due to take effect in England on 1 October 2026. This will apply to residential developments in England of at least 10 dwellings or 30 student bedspaces, with Scotland introducing its own levy planned for April 2027. The amount of the levy will vary by local authority and will be another factor to consider in viability appraisals. 

The Building Safety Regulator (BSR) is transferring to a new executive non-governmental public body sponsored by the Ministry of Housing, Communities and Local Government, on 27 January 2026. This follows criticism of the frustrating delays experienced, particularly at the Gateway 2 stage. Gateway 2 is a mandatory checkpoint that requires approval of the detailed design for higher-risk buildings before construction work begins. This change to the BSR is also the first step towards establishing a single construction regulator, a key recommendation of phase 2 of the Grenfell Tower Inquiry.

Cladding remediation remains a priority, with a Remediation Bill expected in 2026 which will impose criminal sanctions on landlords who fail to remediate affected buildings by 2029. Regulations requiring person-centred fire risk assessments and Personal Emergency Evacuation Plans (PEEPs) will come into force on 6 April 2026.  This will apply to all high-rise buildings and to medium-rise buildings that do not have a “stay put” strategy for evacuation. Some operators will already have well-developed person-centred fire risk assessment processes, but they will now need to check that these comply with the new regulations.

We are expecting some important court decisions in 2026, with the Supreme Court hearing appeals on the retrospectivity of the Building Safety Act 2022 (BSA) and the Court of Appeal considering the protections given to leaseholders facing service costs for ‘cladding remediation’. There may also be some procedural changes if the proposals from the BSA Working Group are implemented. These include a streamlined resolution process in cases where the parties are seeking different orders under the BSA which span the jurisdiction of both the First Tier Tribunal (Property Chamber) and the Technology and Construction Court.

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Commercial Leases

The UK Government surprised the property industry last summer by publishing draft legislation to ban upwards-only rent reviews in commercial leases. The Bill, now at Committee stage in the House of Lords, has already undergone revisions which suggests that the government intends to proceed despite concerns from the property industry.  We have previously commented on the detail of the proposed legislation – see Upwards only rent reviews to be banned in 2027/28?. Industry bodies continue to press for further amendments and comments in Hansard suggest that the Lords will examine the detail of this topic carefully. Businesses should monitor developments closely, as these changes could significantly impact lease negotiations and investment strategies.

Last year we wrote about the Law Commission’s consultation, ‘Business Tenancies: the right to renew’. The Law Commission has since confirmed its provisional view that there should be no change to the model of security of tenure and that the existing contracting-out model should remain. However, a second technical consultation paper is due to be published in Spring 2026, focusing on the duration of tenancies that are excluded from the Act and other technical aspects of the ‘contracting out’ process. Businesses can use this second consultation to share their views and help shape any future legislative changes.

We anticipate some further interesting commentary from the Law Commission in future, with commercial leasehold law having been identified as one of the topics for the next programme of law reform. Timing has not been confirmed but it intends to consider issues with the Landlord and Tenant (Covenants) Act 1995, rights of first refusal under the Landlord and Tenant Act 1987 (in so far as relevant to commercial premises) and the law governing the maintenance, repair and upgrading of leased commercial buildings. We recognise that these issues, particularly some of the complexities around Authorised Guarantee Agreements and structuring mixed use schemes, present real challenges for many of our clients and we would welcome reforms that simplify the law and remove barriers to commercially sound deals.

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Business Rates

Further reforms are on the way in 2026, but they fall short of Labour’s bold manifesto commitment to “replace business rates” altogether. Business rate bills are based on a property’s assigned ‘rateable value’, which is reassessed every 3 years, and a multiplier. The next revaluations of non-domestic properties in the UK will take effect on 1 April 2026 which will coincide with a new system of multipliers being introduced. 

There will be a new band for high-value premises (£500,000 or more) and two new permanently reduced multipliers for Retail, Hospitality and Leisure (RHL) properties. Although the multipliers are lower, RHL businesses will still be under pressure as the 40% business rate relief for RHL properties (the current discount under a phased reduction of the 100% discount introduced under the pandemic) will end on 31 March 2026. Even with the transitional relief package, many businesses are still facing significant cost increases. In response to recent pressure from industry groups, reports suggest that the Treasury will shortly announce changes to the way pubs’ business rates are calculated, aiming to limit the rise in bills.

The government’s call for evidence on Business Rates and Investment remains open until 18 February 2026.  We encourage interested parties to respond and play an active role in shaping future the design of future policy

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ESG

World political developments, including some high-profile policy shifts, have led some commentators to suggest that ESG may be slipping down corporate agendas, but the reality in the UK real estate sector is quite different.  Occupiers and investors recognise that the sustainability of buildings directly influences value, reduces regulatory and operational risks, and strengthens long‑term business continuity.

However, the ongoing policy vacuum on the minimum energy efficiency standard (MEES) for commercial leases is creating uncertainty for businesses and delaying key investment decisions. The Climate Change Committee’s report to parliament last year noted that “there is a continuing lack of policies for decarbonising commercial buildings”. The government had previously indicated that it would respond to the 2021 consultation on MEES for commercial leases early last year, but nothing has yet been published. 

There has been more recent engagement in the context of residential lettings and the government’s response to last year’s consultation (Improving the energy performance of privately rented homes: 2025 update) is awaited.  The government proposes raising the minimum energy efficiency standard required to the equivalent of Energy Performance Certificate (EPC) C by 2030.

It's now over a year since the government launched its consultation on the reform of EPCs and the response is awaited. The consultation proposes a major shift towards a more accurate, multi‑metric assessment framework. We expect that the government will issue its formal response to the EPC consultation before finalising the next phase of MEES reforms. 

We have advised on some complex legal points relating to commercial solar rooftop leases over the past year. We expect this to be a growing area, with the UK’s Solar Roadmap stating that “there is also huge potential for commercial buildings, which offer large roof spaces, and for public sector buildings, including social housing, to contribute to solar deployment”. The plan acknowledges the challenges posed by the traditional lease structure and includes an action point to develop guidance on improving contractual agreements between landlords and tenants.

New regulations on heat networks will come into force on 27 January 2026 and we have considered the detail - Turning up the heat on heat networks: new regulation takes effect in 2026 : Clyde & Co. This will affect any landlords that supply heating, cooling or hot water to tenants from a central source, but it is a particularly key issue for social landlords who own and manage two thirds of all existing heat networks, mostly in the form of communal boilers.

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Planning

The Planning and Infrastructure Act 2025 received royal assent at the end of last year. This wide-ranging legislation, which addresses both planning and environmental issues, is intended to improve local decision making and simplify the consent process for major infrastructure projects. There will be further enabling legislation throughout the year as more of the Act is brought into force.

Another significant bill currently progressing through Parliament, is the English Devolution and Community Empowerment Bill. This provides for certain central government powers to be transferred to a local level where new Strategic Authorities which will be responsible for housing and planning. Sector responses to date have been cautiously positive, but we anticipate lively debate on the detail as the bill enters the committee stage in the House of Lords on 20 January 2026.

The National Planning Policy Framework (NPPF) is the central statutory planning policy document for England. The government is currently consulting on a substantially revised NPPF, with the consultation period running until 10 March 2026 and the response expected in Summer 2026. The government describes this, alongside earlier planning reform measures in the Parliament, as a “truly seismic regearing of the system”.  Ultimately, its effectiveness will only be demonstrated in delivery.

We will continue to monitor and report on these and other legal developments throughout the year on our UK Real Estate Hub. To receive insights direct to your inbox, you can subscribe here.

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