PBSA exemption creates unexpected right of first refusal risk

The Renters' Rights Act 2025 (RRA) creates an unintended consequence for tenancies of private purpose-built student accommodation (PBSA).

Meeting certain criteria, PBSA is exempt from the assured tenancy framework under the RRA so that, from 1 May 2026, landlords can grant students common law tenancies that have fixed terms aligning with the academic year and rent can be taken in advance.

The exemption is contingent on either the landlord or its managing agent being a member of a government-approved code of practice, currently Accreditation Network UK (ANUK), Unipol or Universities UK (UUK). 

Under this right, if the relevant statutory qualifications are satisfied, a landlord who intends to make a relevant disposal – such as a sale – of its interest in particular premises is first required to offer qualifying tenants of flats in the premises the right to acquire that interest before disposing of it to a third party.

The consequences of non-compliance with the right of first refusal are serious.

Landlords who do not comply and do not have a reasonable excuse have committed a criminal offence, and tenants are given various rights that enable them to investigate and potentially unravel the disposal.

Not all residential tenants will benefit from the right of first refusal. For example, a tenant with an assured tenancy – such as an assured shorthold tenancy or, after 1 May 2026, an assured periodic tenancy – is not a qualifying tenant and does not benefit from the right of first refusal.

The statutory qualifications include that the qualifying tenants in the relevant premises must between them own at least two flats in the premises, and the number of flats held by those tenants must exceed 50% of the flats in the premises.

Before the RRA, most PBSA tenancies were assured tenancies and therefore the tenants were not qualifying tenants and did not benefit from the right of first refusal.

Since the RRA now exempts PBSA from the assured tenancy framework, new PBSA tenancies are common law tenancies rather than assured periodic tenancies, and the unintended consequence is that the tenants potentially benefit from the right of first refusal.

Therefore, a disposal of PBSA that prior to the RRA would not have been affected by the right of first refusal may now be impacted by the right.

This appears to be an unintended consequence of the RRA, and we understand that industry bodies will be reaching out to government to highlight the concern.

Following the RRA, landlords may be more likely to grant residential tenancies to companies to avoid the impact of the RRA. The flipside is that the company will potentially benefit from the right of first refusal.

While corporate tenants of residential space have previously had the potential to benefit from the right of first refusal, this will in future become more of an issue for landlords with the increased likelihood of companies being granted residential tenancies.

However, that is the current position, and landlords considering PBSA disposal need to analyse carefully whether their disposal is caught by the 1987 Act.

It is hoped that further legislation is enacted to resolve this unintended consequence of the RRA – namely, amending section 3 of the 1987 Act as to who is a qualifying tenant.

Landlords should also be aware that corporate tenants of residential properties may qualify for the right of first refusal.

A version of this article was previously published by CMS in July 2026. The article reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to any specific matter.