Traditional 'rent to buy' schemes, where a tenant leases a property for a period before purchasing it, appear to be largely unviable for private landlords following the introduction of the Renters’ Rights Act 2025. The Act has altered the landscape for assured tenancies and payments, making key elements of the old model problematic.
Under the new Act, all assured tenancies are now periodic, meaning a tenant can end their tenancy with two months' notice at any time. This directly conflicts with the fixed-term tenancies typically used in 'rent to buy' arrangements, and purporting to let for a fixed term can lead to civil penalties of up to £7,000.
Furthermore, the Act impacts how deposits and rent credits can be handled. Taking upfront option fees or monthly payments above market rent to build a deposit pot is now likely unlawful. The legislation restricts landlords to taking no more than one month's rent in advance after the tenancy agreement is signed, and anything outside this is considered a prohibited payment under the Tenant Fees Act 2019.
While the Act does recognise 'rent to buy' arrangements by creating a dedicated possession ground (Ground 1B), this is only available to private registered providers of social housing under specific conditions, such as offering rent no higher than 80% of market rent and a minimum five-year notice period before sale.