The Impact of Increasing Lease Conversions on Estate Agents in 2026
2026 is shaping up to be a watershed year for the property market. Economic pressures, shifting demand and regulatory changes are converging to create a surge in lease conversion applications. For estate agents, this “perfect storm” will reshape the portfolios they manage and redefine their role in advising landlords. Mustafa Sidki of the construction team at Thackray Williams explains how to turn this risk into an opportunity.
Why 2026 will see a surge in lease conversions
Thackray Williams are already seeing landlords explore conversion options to protect portfolio value, as well as applications from tenants who no longer require commercial premises and are looking to challenge restrictive covenants to enable them to convert long leases into residential use.
The combination of fiscal changes, economic and social pressures and regulatory reform means 2026 will be a pivotal year:
• Economic viability: For landlords, converting underused commercial spaces into residential units offers a route to stabilise income streams.
• Business pressures: With businesses typically no longer having the same demand for commercial premises as they did pre-pandemic, many are looking for ways to create income from properties that are currently draining their bottom line.
• Tax changes: The additional 2% property income tax from April 2027, announced in the Autumn Budget, is prompting landlords to rethink long-term strategies.
• Market demand: With continued pressure on housing supply, and reduced private rental sector homes available as some landlords reconsider their positions, conversions to residential tenancies are an attractive proposition.
This trend is not new, but the pace and scale expected in 2026 will be unprecedented — and estate agents need to be ready.
Understanding the legal framework
Lease conversions are governed by a complex legal landscape that estate agents and landlords must navigate carefully. Key considerations for successful lease conversion include:
• Planning consent: Securing approval for change of use from commercial to residential under local planning rules.
• Building compliance: Meeting safety standards under the Building Safety Act and the Decent Homes Standard.
• Restrictive covenants: Using Section 84 of the Law of Property Act 1925 to modify or discharge covenants that block conversion.
• Leaseholder rights: Where properties are subject to existing leases, landlords must follow statutory procedures for variation or surrender.
Failure to comply with these requirements can result in costly delays or disputes. Estate agents advising landlords should ensure they understand these legal mechanisms — and work closely with specialist solicitors to avoid pitfalls and keep projects on track.
Section 84 of the Law of Property Act 1925 – what you need to know
Section 84 of the Law of Property Act 1925 provides a statutory route for landlords or tenants to apply to the Upper Tribunal (Lands Chamber) to discharge or modify restrictive covenants that prevent a change of use. This is critical for lease conversions where existing covenants restrict residential development.
The Tribunal can grant an application if the lease was originally granted for a term exceeding 40 years and more than 25 years of the term have expired, and if one or more statutory grounds under Section 84(1) are met, including:
• The restriction has become obsolete due to changes in the property or neighbourhood;
• The restriction impedes reasonable use of the land and offers no substantial practical benefit, or is contrary to public interest, with compensation available for any loss;
• The beneficiaries of the covenant have agreed to its removal;
• Modification will not injure those entitled to the benefit.
Even if a ground is proven, the Tribunal retains discretion and will consider planning policies, the original purpose of the restriction, and other material circumstances. Expert evidence from surveyors and planning professionals is often essential to support an application and demonstrate that modification is justified.
Case study: The precedent that changed the game
The landmark case of Shaviram Normandy Ltd v Basingstoke and Deane Borough Council [2019] UKUT 256 (LC) was the first time the Upper Tribunal exercised its jurisdiction under Section 84 of the Law of Property Act 1925 in relation to a leasehold interest. The Council owned the freehold of a building in Basingstoke, let in 1985 for 150 years with a permitted use as offices. By 2019, the building was vacant and in disrepair. The tenant sought to redevelop it into 114 residential flats for assured shorthold tenancies. Planning consent for the change of use had been granted, but the lease restriction on office use remained. When the Council refused consent, the tenant applied to the Tribunal to modify the covenant.
The Tribunal allowed the application, finding the restriction impeded reasonable use and conferred no practical benefit of substantial value on the Council. In reaching its decision, the Tribunal considered the development plan, local planning patterns, and expert evidence on capital value and rental income. While residential use would slightly reduce rental income, it significantly increased the building’s capital value — a more important factor. The Tribunal also rejected arguments that maintaining office use supported the town’s economic wellbeing or that granting the application would set a precedent for other
Council-owned properties.
This case demonstrates how Section 84 can unlock redevelopment opportunities where restrictive covenants hinder viable use, provided applicants can show the covenant offers no substantial benefit and expert evidence supports the change.
Turning law into practice
For landlords, the practical steps include:
• Reviewing existing lease terms and identifying properties suitable for conversion as well as those where commercial tenants might apply for a removal of restriction.
• Engaging legal and planning professionals to manage applications and compliance
• Budgeting for conversion costs and potential void periods during works.
Estate agents play a critical role here — from advising on market viability to coordinating with legal teams. Those who position themselves as strategic partners will add significant value.
What this means for estate agents
Expect portfolios to look different by the end of 2026. Traditional commercial instructions may decline, while demand for marketing newly converted residential units will rise. Agents will need to:
• Expand expertise in residential lettings and sales
• Understand compliance obligations under new tenancy regimes
• Offer landlords proactive advice on maximising returns from conversions
Opportunities to seize — and why timing matters
The Renters’ Rights Act, coming into force in May 2026, adds another layer of complexity — and opportunity. With the abolition of Section 21 evictions and tighter controls on rent increases, together with the increase in tax on income from property, many landlords are expected to sell residential properties. This creates two openings for estate agents:
1. Marketing converted properties: With fewer rental homes available, demand for high-quality units will be strong
2. Advisory services: Agents who can guide landlords through compliance and conversion will differentiate themselves in a competitive market
Estate agents who act now to build expertise in lease conversions and regulatory compliance will be best placed to thrive in 2026.
Meet the expert: Mustafa Sidki is a partner at Thackray Williams, a leading Southeast law firm, where he specialises in litigation and dispute resolution. Additionally, Mustafa handles commercial disputes involving breach of contract and shareholder disagreements.
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