Joe Edwards and Laura Bushaway of Charles Russell Speechlys on changes to possession actions

Joe Edwards is a partner in the real estate disputes team at Charles Russell Speechlys

Laura Bushaway is a knowledge development lawyer in the real estate disputes team at Charles Russell Speechlys

Below are some of the key provisions for lenders and receivers to be aware of and the steps they can take to prepare for implementation of the act.

Lenders will want to review their standard documents and templates, as after 1 May it will no longer be possible for residential properties to be let on a fixed-term assured shorthold tenancy (AST). These will be replaced by monthly assured periodic tenancies (APTs), which continue indefinitely on a month-to-month basis and can only be terminated by serving notice relying on a statutory ground for possession or upon the tenant serving notice to leave. As part of that process, they may also wish to review their documents for appointing receivers and their instructions to them to ensure they align with the RRA.

From 1 May, existing ASTs will automatically be converted to monthly APTs. Where existing security documentation (pre-1 May 2026) permits or requires a property to let on an AST, the act implies a term into those documents permitting a letting on a monthly APT. This means that when the changes come into force under the act, there will be no breaches of security documentation by reason of an AST converting to an assured tenancy.

In the usual way, however, lenders will want to monitor other breaches of loan documentation. For example, if a property has been let to a company, this may be a breach where only lettings on ASTs are permitted as a company cannot be the tenant under either an AST or an assured tenancy.

Crucially, one or more grounds of possession will need to be relied upon to obtain a possession order. Where a receiver is appointed, they essentially step into the shoes of the borrower, as landlord. After 30 April 2026, Section 21 notices (giving two months’ notice to a tenant to vacate without any ground for possession) can no longer be served. For receivers, the most common grounds of possession, as amended by the act, are likely to be:

• Ground 1A: the landlord/receiver wants to sell the property but this is accompanied by restrictions on re-letting for at least a 12-month period if a sale does not proceed;
• Ground 6B: this is a new mandatory ground that will enable possession to be obtained where the property is an unlicensed house in multiple occupation because either no licence has been obtained or it has been refused. The court can make an award of compensation to a tenant under this ground;
• Ground 8: three months’ arrears (rather than two) will be required both at the date of service of a notice seeking possession and at the court hearing.

If any of these grounds are established, the court must make an order for possession.

Lenders may incorporate into the security documentation a reliance on the amended Ground 2: where the mortgagee is entitled to exercise a power of sale, they can require service of a notice seeking possession on grounds that the mortgagee requires vacant possession to sell the property. It will no longer be necessary for the mortgage to be granted before the beginning of the tenancy nor for notice to be given before the tenancy was entered into for possession to be obtained on this ground.

Another anticipated impact of the RRA is an increase in court delays, since the accelerated possession procedure enabling a possession order to be obtained following service of an S21 notice will be removed. Accelerated claims usually proceed without a hearing, but as it will be necessary to establish a ground of possession in all cases under the act, more claims will reach a possession hearing and sufficient evidence will be required to prove a ground of possession. There are other routes available to a lender such as exercising its statutory powers of sale without obtaining vacant possession, but this may depress the sale price and realisation of its security.

While the RRA will not prevent lenders or receivers from recovering possession of residential properties in the event of a default under the security by the borrower, it is important that they familiarise themselves with the incoming changes and the extra hurdles required to prove one or more grounds of possession.

Joe Edwards is a partner in the real estate disputes team and Laura Bushaway is a knowledge development lawyer in the real estate disputes team both at Charles Russell Speechlys