How will the Renters’ Rights Act 2025 impact professional short-term rental operators?

The Renters’ Rights Act 2025 (the Act) received Royal Assent on 27 October 2025. It represents the most significant reform of England’s private rented sector in a generation. The Government has confirmed that the Act’s reforms will be implemented in stages (via secondary legislation and commencement orders). The exact commencement date for each set of measures is not yet published; however, the main reforms – the abolition of fixed-term assured shorthold tenancies (ASTs), the abolition of Section 21 ‘no fault’ evictions, and a shift to periodic tenancies – could be in force by early summer 2026.

While many short-term rental (STR) arrangements currently fall outside the scope of the Act, there are traps for the unwary. Poorly drafted agreements, long-stay guests, or unclear operational models could all cause an STR business to inadvertently drift into the scope of the Act, bringing unexpected compliance burdens and restrictions on flexibility. Pending entry of the Act’s provisions, professional STR operators would be well advised to ensure that they use this period to mitigate exposure to the Act.

Understanding the Act

The Act primarily reforms the assured tenancy regime created by the Housing Act 1988 (1998 Act). The most salient provisions are summarised below:

• The Act abolishes the use of section 21 ‘no-fault’ possession notices under the 1988 Act, meaning landlords can no longer evict tenants without providing a valid ground.
• It ends fixed-term ASTs for new lets and replaces them with periodic (rolling) tenancies by default.
• With all tenancies being periodic, tenants can decide to end their tenancy by giving just two months’ notice.
• The Act prohibits charging more than one month’s rent in advance.
• It introduces a protected minimum period for new tenancies of 12 months during which eviction cannot be sought on some non-fault grounds.
• Landlords of regulated tenancies will be legally required to register their let properties on the new Private Rented Sector Database (Database).
• Landlords who fail to register on the Database cannot obtain a possession order except if the ground under which possession is sought relates to tenant anti-social behaviour.
• Furthermore, where landlords fail to join the Database, local authorities can levy penalties of up to £7,000 for initial breaches and up to £40,000 and/or criminal prosecution for continuing or repeated breaches.

Crucially, the Act applies only to ‘residential tenancies’ that qualify as assured tenancies under the 1988 Act. Certain categories of occupation are currently excluded, including genuine holiday lets, commercial licences, corporate tenancies, tenancies with annual rent in excess of £100,000 p.a. and tenancies for a period in excess of seven years (exempt occupation). However, the Act reserves the right for Government to bring exempt occupation within the scope of the Act in the future.

For STR operators, the key question is whether a guest’s occupancy constitutes an assured tenancy or an exempt occupation. The distinction turns not on the substance of the agreement and the actual use of the property.

Why STRs should currently qualify as exempt occupation

Most STRs should currently remain outside the scope of the Act because they do not grant the occupier an assured tenancy. Typically:

• The purpose of occupation is holiday, leisure, or temporary work accommodation.
• The duration of each stay is relatively short, often measured in days or weeks.
• The operator retains control over services, access, and property management.
• The guest has no exclusive possession of the property.

However, the dividing line is not always clear. Courts and tribunals will assess the actual use of the property. Simply calling an agreement a ‘licence’ or ‘holiday let’ will not make it so if the guest enjoys exclusive possession as a home.

The risk of ‘creeping tenancies’

STR operators increasingly cater for longer corporate stays, relocation clients, or ‘digital nomads’ seeking accommodation for several months at a time. These medium-term stays can blur the line between assured tenancies and exempt occupation.

Common red flags include:

• Extended occupancy: stays over 90 days (including renewals or rolling extensions).
• Exclusive possession: the guest holds keys and the operator exercises little control.
• Residential purpose: the occupier treats the property as a home rather than temporary accommodation.
• Lack of services: cleaning or linen changes are infrequent, suggesting a tenancy rather than serviced use.

Where these conditions exist, courts and tribunals could determine that an assured tenancy has arisen, bringing the property within the Act. This could significantly undermine a STR operator’s business model, restricting flexibility and increasing management complexity.

Practical steps to mitigate risk

With careful drafting and the implementation of proactive operational measures, STR operators can maintain the commercial, non-residential character of an exempt occupation and lawfully stay outside the scope of the Act.

1. Review and update contract documentation

Legal drafting remains the first line of defence. Operators should:

• Review all licence templates, booking terms, and platform listings to ensure consistency with short-term status.
• Include indemnities protecting the operator if the guest misrepresents the nature of their occupation.

Avoid language suggesting long-term residential occupation, for example, use of the words ‘tenant’, ‘landlord’ and ‘rent’. Instead, use terms aligned with licences such as ‘guest’, ‘host’, and ‘licence fee’.

Periodic legal review is advisable, particularly as Government guidance on the Act evolves.

2. Clearly define the nature of the stay

Consider using bespoke licence agreements for each stay, but failing this, ensure your terms and conditions, contracts, marketing, and business model align around temporary use. Specify that accommodation is provided:

• For holiday, leisure, business-trip, or short-term relocation purposes;
• Not as a principal home or permanent residence; and
• Ideally, include a right allowing you to terminate on, for example, 24 hours’ prior notice.

3. Maintain service characteristics

Active management and service provision indicate a commercial hospitality licence rather than a passive residential tenancy. The more services you provide, the stronger the argument that occupation is subject to a licence. Include:

• Regular cleaning and linen changes;
• 24/7 guest support or concierge;
• Retain maintenance access to the licensed property; and
• Include council tax/business rates, utilities, and Wi-Fi as part of the licence fee.

4. Limit duration and extensions

Set maximum occupancy to 90 days and avoid automatic renewals that could imply open-ended occupation. Where guests need longer stays, consider transferring them to another property.

Maintain clear procedures to vacate and reset properties between bookings, as evidence of re-letting helps show genuine short-term use.

5. Retain access and control

Your licence agreement should reserve rights of entry for cleaning, maintenance, and inspections, ideally without having to give notice, but failing that, on providing reasonable notice. Incorporate express clauses confirming that the guest does not have exclusive possession or security of tenure and provide for automatic termination if the guest seeks to use the property as their principal home.

6. Monitor booking patterns and length of stay

Maintain internal compliance data showing average stay duration, booking turnover, and property usage. This evidences that your business is genuinely short term and commercial.

7. Train staff and partners

Ensure your operations team, property managers, and customer-service staff understand the distinction between tenants and guests. An inadvertent email describing someone as a ‘tenant’ or referring to a ‘renewal lease’ could undermine your legal position if challenged.

The future regulatory landscape

Although the Act does not directly regulate STRs, the Government has signalled separate reforms but has yet not given any indication as to when. Reforms include:

• A mandatory national register of STRs;
• A planning use-class for STRs, allowing local authorities to restrict or license STR activity; and
• Potential tourism levies or licensing fees.

STR operators should therefore not assume that STR accommodation will remain lightly regulated. Staying alert to emerging local requirements remains essential.

If you are a STR operator and have questions or concerns about the Renters’ Right Act, please contact Nadia Milligan.