Commercial landlords and property investors should prepare for a surge in lease conversion applications in 2026 – a trend that not only poses challenges from tenants seeking to switch long-term commercial leases to residential use but also offers significant opportunities to reshape portfolios for stronger returns. With housing demand soaring and commercial space under pressure from hybrid working and shifting retail habits, 96,000 new homes in England have already been created in recent years from former retail space.

While growing numbers of landlords are using lease conversions as a strategic tool for unlocking value and future-proofing investments, they’re not alone in exploring this route. Tenants locked into long leases for properties that no longer make commercial sense are increasingly seeking ways to unlock value – even where leases prohibit residential use.

For landlords and investors, understanding the legal framework is essential. It enables you to anticipate portfolio changes, identify opportunities to improve returns from underperforming assets, and prepare for applications you may wish to oppose.

The legal route to convert leases
Restrictive covenants – such as those limiting use to commercial purposes – can be modified or discharged by the Upper Tribunal (Lands Chamber) under Section 84 of the Law of Property Act 1925.

While Section 84 is most commonly used to release covenants on freehold land, it can also be applied to leases, provided the lease was originally granted for a term exceeding 40 years, and more than 25 years of that term has expired.