2026 Property industry outlook: Key reforms and market impact

Building safety reforms: Impact on liability and costs

Following the Grenfell Tower tragedy, the government has committed to improving building safety across the UK. In 2026, we expect further tightening of safety regulations, particularly concerning cladding, fire safety, and construction materials. The Building Safety Act 2022 ('the BSA') has already introduced new obligations for building owners and managers, including mandatory reporting of fire safety risks and the establishment of a new Building Safety Regulator. We have also seen several significant cases during 2025 in which the Courts have been inclined to interpret the BSA in a way so as to protect the leaseholder, which is in line with the original intention of the BSA.

The likely impacts on the sector are as follows

• Liability risks: Property owners, developers, and landlords could face increased liability risks if they fail to comply with the new regulations. This may lead to higher insurance premiums for buildings with cladding or other fire safety concerns.
• Development costs: Developers may see rising costs as they are required to meet more stringent safety standards. This will likely affect the overall cost of construction and, in turn, the price of new developments.
• Increased litigation: We are expecting to see more litigation arise out of disputes over the interpretation of the Act. The recent cases of Triathlon Homes LLP v Stratford Village Development Partnership and other companies [2025] EWCA Civ 846 and Adriatic Land 5 Ltd v Long Leaseholders at Hippersely Point [2025] EWCA Civ 856 have been granted permission to appeal to the Supreme Court in which the Court will consider whether the recoverability of the freeholder's costs is also limited by the Act, despite being incurred prior to the coming into force of the BSA.

Renters' Rights Act: Increased protection for tenants

The Renters' Rights Act 2025 ('RRA'), the primary provisions of which are expected to be fully implemented by 2026, will mark a significant shift in the rental landscape. The goals of this legislation are to:

• Abolish no-fault evictions, providing tenants with greater security.
• Introduce longer-term tenancies with more predictable rent increases.
• Improve the standard of rental housing and ensure that renters have access to more information about their rights.

Impact on the market

• Landlord risks: Landlords may face challenges in evicting tenants and adjusting rent in response to market conditions, reducing flexibility.
• Investment shifts: Investors may become more cautious when entering the buy-to-let market, potentially leading to a decline in new rental property investments.
• Tenant stability: While tenants gain greater security, the reduced ability to remove non-compliant tenants may result in higher management costs and a possible shift in rental yield expectations.
• Students: students who meet the student test and are not occupying University accommodation, purpose-built student accommodation or HMO's will be assured tenants with all the protections of the RRA. There is a possibility that this will ultimately lead to a reduction in student accommodation stock.

Ban on upwards-only rent reviews: A game changer for commercial leases

The proposed ban on upwards-only rent reviews in commercial leases is expected to take effect in early 2027. As currently proposed, this reform will affect most leases in the commercial sector, particularly in office and industrial spaces, where rent reviews are typically structured to increase over time. Ironically, leases in the retail sector, which are the target of this legislation are likely to be unaffected as they tend to be for shorter terms and so are unlikely to contain a rent review in any event.

Impact on the market

• Rent stability: Tenants will benefit from the removal of upwards-only rent clauses, leading to more predictable and manageable rental expenses.
• Landlord returns: Landlords will need to adjust their expectations for rental income, as the potential for rent increases will be limited, especially in uncertain economic climates. This may also decrease the attractiveness of commercial property as an investment.
• Lease negotiations: The ban will likely lead to shorter-term, contracted out leases with a move to longer-term valuations.

Leasehold reform: Addressing historic inequalities

Leasehold reform is another major area of focus, with the government pushing for more equitable practices. The Leasehold Reform (Ground Rent) Act 2022 has already introduced significant changes, such as setting ground rents for new leasehold properties at zero. 

Further reforms in 2026 will likely focus on:

• The ease of converting leasehold properties to freehold.
• Making it simpler for leaseholders to collectively purchase the freehold of their buildings.

Impact on the market

• Property valuations: A shift towards the abolition of leasehold ground rents may impact the valuations of leasehold properties, making them more attractive to buyers.
• Legal complexity: The reform will reduce the complexity associated with leasehold properties, but ongoing legal disputes may arise as freeholders and leaseholders adjust to the new rules.
• Buyers’ preferences: Increasing demand for freehold properties or more favourable leasehold terms may change buyer preferences, particularly in the residential market.

Environmental, Social, and Governance (ESG) standards: Growing influence on investment

The property sector continues to face pressure to improve its environmental impact, with ESG criteria becoming increasingly important. By the end of 2026, the expectation is that ESG considerations will become central to decision-making in the property industry, particularly as the government seeks to meet its net-zero targets.

Impact on the market

• Compliance costs: Developers and landlords will need to invest in making their buildings more energy efficient, potentially increasing initial development costs. However, these investments may pay off in the long run through lower operational costs and higher tenant demand for energy-efficient properties.
• Green investment: ESG-focused investment will continue to rise, with investors increasingly prioritising sustainable and ethically managed properties, leading to a shift in capital towards green developments.
• Regulatory pressure: Expect more stringent regulations requiring reporting on ESG performance, potentially increasing legal and compliance costs for property managers and owners.

Landlord's commission

The case of London Trocadero (205) LLP v Picturehouse Cinemas Ltd and other companies [2025] EWHC 1247 (Ch) sent shockwaves through the property industry in 2025 when the High Court determined that, on a strict interpretation of the lease, the landlord was not entitled to recover landlord's commission and certain administrative charges as 'insurance rent'. The Landlord has now been given permission to appeal this decision to the Court of Appeal with a hearing listed for 3 June 2026. The principal issue before the Court of Appeal will be whether the High Court was correct in its strict interpretation of the lease.

Impact on the market

• Lease drafting: An immediate implication of the High Court decision was for Landlords to ensure that the lease was drafted with precision to enable recoverability of landlord's commission
• Historic and future charges: Tenants have now begun a scrutiny of historic and future insurance charge invoices and have begun to request supporting evidence from Landlord's to justify the amounts demanded.
• Transparency: the case has highlighted market expectations about transparency and fairness in cost recovery and landlord and tenants are more likely to negotiate actively over what can be recovered as part of the insurance rent sums.

Navigating the changing landscape

In conclusion, the property sector is set to undergo significant transformation due to regulatory and legislative changes. While some of these reforms will provide greater stability and fairness for tenants and homeowners, they will also create new challenges for developers, landlords, and other stakeholders in the market. As always, it is crucial to stay informed and agile to navigate these changes effectively and to capitalise on the opportunities they present

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For more information or advice, please contact Stacey Nixon in our Real Estate team.