Commercial property owners holding residential units within mixed-use portfolios are facing mounting regulatory and financial pressures. This is due to new tenancy legislation and compliance requirements, creating management challenges for organisations primarily focused on commercial operations.
The management burden includes tenancy administration, rent collection, repairs, safety checks, deposit management, inspections, and licensing. The RICS's Commercial property management in England and Wales guidance note highlights "considerable differences" in managing commercial and residential occupiers, particularly regarding the greater statutory protection for residential tenants.
Since 1st May, the Renters' Rights Act has altered private residential tenancies, moving assured tenancies onto a periodic basis and changing landlord processes. Additional requirements include deposit protection, gas and electrical safety, energy standards, Right to Rent checks, and HMO and selective licensing. Compliance can vary by local authority for dispersed portfolios.
Government data indicates that companies hold 15% of private tenancies in England, while representing only 6% of landlords. Over half of company landlords own five or more properties. Industry sources suggest that incidental residential holdings can suffer from unreviewed rents, avoidable voids, reactive maintenance, and management costs not considered at a portfolio level.
Adam Hills, Client Services Director at LRG Living Markets, advises commercial property directors to assess their knowledge of residential holdings and performance. He suggests centralising information on rent, occupancy, arrears, repairs, compliance deadlines, and capital requirements to gain a portfolio-wide view.