There is lots of new law that impacts on BTR – from rental reform to building safety and setting up For Profit RPs. Have a look at this Q&A to see the issues on those and other current legal points.
Build to rent – section 21 doesn't worry me, but is there more in the Renters (Reform) Bill?
Yes! Some of the changes are more relevant to the Affordable sector, but there are others which are potentially relevant to BTR as well.
The Bill requires all rent increases to be carried out using the statutory procedure in the Housing Act 1988. Any contractual provisions for rent increases will be of no effect. It is worth knowing that the notice period is likely to be increased from 1 month to 2 and if the tenant challenges the section 13 notice then the rent may be set by tribunal.
Many BTR providers are more flexible about pets than the rest of the PRS sector, but the Bill includes an implied tenancy term to keep a pet with landlord's consent (not to be unreasonably withheld).
BTR providers will be required to register under the Private Rented Sector Database and there will be a charge for this. Similarly they will be required to become members of a new Property Ombudsmen scheme which will be granted various powers to resolve disputes between landlords and tenants.
Please contact Samantha Hall for more information.
Build to rent – should I set up my own For Profit Registered Provider?
The mechanisms allowing for the creation of For Profit Registered Providers (FPRPs) of Affordable Housing have now existed for some time, but it is more recently when institutional interest in the Affordable sector blossomed.
At this point there are various well known names that have taken on the challenge of becoming and FPRP (including several funds who have also invested in BTR) including the likes of Legal & General, M&G and (through Sage Housing), Blackstone.
A newer phenomenon is BTR providers looking to ease their passage through the planning system by being in control of both the BTR provision and the Affordable on their sites. They are doing so by establishing FPRPs within their fund mechanisms which can take on the relevant role. Other BTR providers have secured FPRP registration in order to secure Homes England or GLA grant funding to deliver additional affordable housing on their schemes, and/or to diversify their offer.
So long as the vehicle in question is registered with the Regulator of Social Housing the relevant Local Planning Authority should have no objection.
The advantage for BTR providers who have gone down this line is that they need not have any concern in relation to the "Grampian" type provisions that many Planning Authorities impose preventing occupation of BTR units until the Affordable units have been provided.
Please contact Rob Beiley for more information.
Build to rent – should I be worried about the Building Safety Act as a BTR owner or funder?
Owners and funders of BTR assets should review their position carefully under the Building Safety Act 2022. The Act does not just apply to new buildings and does not just apply to buildings where flats are sold. Any building containing residential units should be appraised to establish what of the new rules and regulations need to be complied with.
The rules relating to higher-risk buildings are likely to be relevant. Owners and their funders will want to know if they have responsibilities under the Act as an Accountable Person or the Principal Accountable Person. Both designations come with considerable new statutory obligations.
To learn more about these duties see our article Management of safety risks in occupied Higher-Risk Buildings under the Building Safety Act 2022.
Some BTR owners may not have the resources themselves to perform on obligations they assume as a result of the Act. They would be well advised to review their contractors in order to ensure that the team as a whole has the necessary competence to perform those obligations.
Doing that is essential as the Act is clear that the statutory obligations as an Accountable Person are not removed as a result of contractual delegation to a third party. If the third party does not perform it remains the Accountable Person who is liable.
Please contact Andy Barnard or Lydia Jones for more information.
Build to rent – should I be worried about the Building Safety Act as a BTR operator?
Operators needs to be aware of the new obligations imposed by the Building Safety Act 2022 on assets that they manage. It is unlikely that an operator under a contract is itself an Accountable Person under the Act. For a more detailed look at this, see our article Can managing agents be Accountable Persons under the Building Safety Act 2022?
Nevertheless operators need to review the position carefully as it is possible that they will have obligations in existing contracts to ensure that they manage the asset in accordance with all applicable laws. Such provisions might well encompass ensuring compliance with the relevant parts of the Act.
Operators should consider carefully whether or not they have the competence to deliver on the relevant obligations under the Act. There are a lot of them and they are potentially onerous to comply with. Please contact Sonia Kuhn to talk to us about the matrix of responsibilities we have prepared detailing the obligations in the Act, the relevant regulations and guidance.
More substantial operating agreements may well contain provisions dealing with change in law and/ or additional services which operators should consider applying in relation to the new obligations.
Please contact Andy Barnard or Sonia Kuhn for more information.
Build to rent – do I need to register my offshore asset holding structure?
The Register of Overseas Entities came into force in the UK on 1 August 2022 pursuant to the Economic Crime (Transparency and Enforcement) Act 2022. The legislation requires foreign owners of UK property to register at Companies House and reveal details of their who their registrable beneficial owners or managing officers are. The legislation is intended to provide for a global standard for transparency in property ownership and to combat economic crime.
Overseas entities who want to buy, sell, or transfer property or land in the UK must register with Companies House and declare who their registrable beneficial owners or managing officers are. The deadline for registration was 31 January 2023 and the rule apply retrospectively to overseas entities who bought property or land on or after 1 January 1999 in England and Wales or 8 December 2014 in Scotland.
Failure to comply will restrict the ability of the overseas entity to carry out transactions involving the land in question, but it is also a criminal offence punishable by fines and / or the imprisonment of the overseas entities' officers.
The Register of Overseas Entities may have been designed to target kleptocrats and oligarchs but its impact has been far more wide reaching. Companies House revealed in December 2023 that over 30,000 registrations had been made and that Companies House is continuing to work with overseas company registries and UK land registries to identify entities which have failed to comply with the rules.
The obligation to register applies where UK property is held in offshore structures (e.g. Jersey, Guernsey, Isle of Man, Cayman, BVI, Luxembourg etc) which is common for BTR sites which have attracted overseas investors.
Finally, there is a requirement for each registered overseas entity to file an update statement with Companies House confirming the information it originally filed is still correct and up to date, even if there has not been any change.
Please contact Nick Harrisingh for more information.
Build to rent – I don't need to worry about UK competition law, right?
Under normal circumstances it is hard to see how UK competition law can be relevant in relation to the acquisition of UK property in general and BTR in particular.
However, given the closeness in nature of BTR and student housing it is worthwhile considering the potential applicability of competition law. By way of example the Competition and Markets Authority (the CMA) did recently consider a purpose built student accommodation (PBSA) transaction that related to the bringing together of different accommodation offerings in Birmingham involving GIC and Greystar (Student Roost).
The CMA was of the view that the transaction, if carried out as originally planned, would give rise to a realistic prospect of a substantial lessening of competition within the relevant market. That market being PBSA in Birmingham. That led to the relevant parties offering undertakings in relation to how to modify the transaction in order to avoid further investigation by the CMA.
There are clear parallels between PBSA assets and city centre BTR assets. Not least how each is capable of being distinguished from the larger student accommodation market in relation to PBSA and the larger Private Rented Sector in relation to BTR. On this basis it would be prudent to consider competition law in relation to BTR secondary market transactions in particular.
Follow this link to the relevant decision of the CMA: Anticipated acquisition by GIC (Realty) Private Limited and Greystar Real Estate Partners, LLC of Student Roost via Roost Bidco Limited
Please contact Andy Barnard or Nick Harrisingh for more information.
Build to rent – I've spent a fortune on branding, how do I protect it?
BTR assets in the UK have so far proceeded down a different avenue in relation to branding than multifamily in the US. In the US many multifamily brands are so well known that if moving cities customers will seek new homes by reference to those brands. The position in the UK is different and the specific branding of each asset is more common.
Irrespective of the direction the market takes in this regard BTR owners and investors will expend considerable sums in creating and marketing brands in the BTR space. Such intellectual property is not necessarily automatically protected and it is beneficial to consider how best to protect it.
The most obvious step to consider is registering appropriate trade marks. That may well include the name of your BTR asset and any logo used with it. Registering your trade marks means you can take action against anyone who uses your brand without your permission, sell and licence your brand and entitles you to put the ® symbol next to your brand to show that it's yours. An application can take around 4-6 months, but will provide 10 years of protection.
It will also be important to incorporate appropriate protections regarding use of your brand into the contracts you have with third parties who will need to use it. There could be a lot of these where your intellectual property is important. For instance your property manager, website designer, creator of any app for tenants, etc.
Please contact Caroline Hayward for more information.
