Letting and property management businesses risk being caught out, not by failing to comply with the Renters’ Rights Act, but by failing to grasp what it does to their numbers, according to financial specialists The Property CA.
Most of the new regime came into force on 1 May 2026, abolishing Section 21 “no-fault” evictions, ending fixed-term tenancies and converting agreements to assured periodic tenancies. Much of the industry’s preparation has centred on legal compliance, tenancy reform and operational process. The bigger threat, argues Diana Mushosho of The Property CA, is financial visibility, and whether agency owners truly understand how the changes will hit cash flow, profitability and long-term resilience. Not just in theory, but in quantified scenarios, with a plan to mitigate them.
“The agencies that struggle over the next few years will not necessarily be the ones that fail to comply with the legislation,” says Mushosho. “They will be the businesses that fail to understand how these changes affect the financial foundations of their organisation, the true drivers of the business.”
The firm’s newly published Renters’ Rights Act Financial Survival Checklist sets out 10 financial areas agencies should be reviewing, among them cash-flow forecasting, landlord profitability, staff utilisation, arrears management and scenario planning. Its central warning is blunt: while most agencies have spent considerable time preparing for the operational implications of the Act, far fewer have projected the wider financial consequences.
The most discussed risk is the prospect of landlords quitting the private rented sector, yet, Mushosho says, almost no one has quantified how much they are prepared to lose before the business begins to crumble. The scale of the potential outflow is not trivial: industry forecasters have warned of a substantial wave of rental homes leaving the sector in 2026.
“Many agencies are aware that some landlords may choose to sell their properties, but fewer have modelled what that actually means for their business,” she says. “What happens if five per cent of your managed portfolio disappears? What about 10 per cent? How does that affect revenue, staffing requirements, overhead recovery and profitability? What is the current buffer for the business, and is there a plan to improve that given the current market?”
The route out of the sector is now narrower than many landlords assume. Under the abolition of Section 21, landlords selling up must rely on Section 8 grounds, and the new ground for sale carries a lengthy re-let restriction, as the National Residential Landlords Association has set out. That friction may slow some exits, but it does little to reduce the financial uncertainty for the agencies managing those portfolios.
The second, less visible pressure is arrears. With some tenants becoming more reluctant to pay on time, or at all, agencies increasingly find money tied up in working capital as owed monies rather than sitting in the bank. The Property CA urges agencies to act now, even with measures as basic as late-payment penalties or interest charges, and the wider regulatory direction is hardening too, with proposals that could see landlords forced to forgo rent for extended periods in some circumstances.
The checklist specifically encourages agencies to stress-test the business against a scenario in which 10 per cent of landlords exit the market, and to understand the resulting impact on staffing needs and financial performance. Mushosho argues that owners must move beyond simply monitoring void periods and lost management fees, and instead analyse the knock-on effects across the entire business.
“This is about understanding your margin of safety,” she says. “Do you know how much revenue your business can lose before it becomes a problem? Do you know what level of reserves you need to maintain? Can you identify which costs would need to be adjusted, and by how much?”
The concern is sharpened by the new operating environment. The end of Section 21, the demise of fixed-term tenancies and heavier compliance obligations are all expected to add pressure to cash flow and margins across the sector. The Property CA’s view is that agencies should be building detailed financial models now, rather than waiting for the warning signs to surface in their accounts.
“By the time cash-flow issues become visible in your bank balance, you are already reacting,” Mushosho says. “The strongest agencies will be the ones that identify risks months in advance and make informed decisions before the pressure builds.”
That means reviewing property-unit buffers, understanding how sensitive the business is to portfolio reductions, and assessing what the most efficient staffing structure looks like under different market conditions. It is a discipline that has helped explain why a growing number of operators are restructuring how they hold and run their portfolios.
“Every agency has a different exposure to risk,” she adds. “The right staffing model for one business may be completely wrong for another. That is why scenario planning is so important. You need to understand how your unique business responds to changes in landlord retention, voids, compliance costs and revenue levels.”
The firm’s message to property management companies is unambiguous: financial resilience should be treated as a strategic priority, not a reactive exercise.
“The Renters’ Rights Act has undoubtedly changed the rules of the game,” concludes Mushosho. “Businesses that continue to rely on instinct, historic performance or a quick glance at their bank balance are leaving themselves exposed. The agencies that thrive will be those that use robust financial data, forecasting and scenario planning to make decisions with confidence before challenges become crises.”
The Property CA is inviting concerned agencies and property management companies to take part in a free 30-minute health check to assess the potential impact on their businesses.
