The secondary market for Build-to-Rent (BTR) schemes has been severely slowed, with transactions now taking over 12 months to complete, as buyers demand increasingly rigorous safety checks post-Building Safety Act 2022.

The New ‘Gold Standard’ for Due Diligence

Investors and developers are encountering massive delays driven by a combination of the current “buyer’s market” and the new compliance requirements. The goalposts for due diligence have shifted dramatically in the last year, moving beyond basic checks to an extensive series of invasive surveys:

• Intrusive Fire Risk Assessments: Buyers are no longer satisfied with standard external wall surveys (like EWS1s). They now demand intrusive facade checks, requiring physical opening up of the external walls to verify construction quality.
• 100% Compartmentation Surveys: The “gold standard” for building safety now involves checking fire compartmentation throughout the entire building, including 100% of all residential units and fire risers.
• Structural Risk Assessments: An additional requirement is a structural risk assessment to confirm the building’s physical stability.

Stacey Patten, head of European residential investment at Invesco, stated that this comprehensive list of surveys means a landlord looking to sell an asset must budget “12 months to get through all of those surveys to prepare accordingly.”

Opaque Regulations and Trust Deficit

The increased complexity is compounded by a lack of standardisation in the regulatory process:

• Conflicting Reports: KKR’s Nicky Barker noted that in a recent portfolio acquisition that took over 12 months, the seller’s initial external wall surveys were redone by a new consultant who produced different, conflicting outcomes.
• Need for Standardisation: The industry is struggling with the “opaqueness” of the compliance landscape. Investors are asking: “How can we make sure that one consultant doing a report is going to come up with the same outcome that we can all trust and believe in…?”

This lack of consistency is pushing the Building Safety Regulator (BSR) to the forefront of the transaction process. The BSR is responsible for approving high-rise homes, but has itself been struggling with a large application backlog and rejecting over 70% of applications due to insufficient detail, indicating a systemic confusion over meeting the new standards.

Market Impact

Despite the delays, investors have shown a preference for existing, standing assets over new developments, committing £722 million to urban flats this year. However, until the BSR provides clear, standardised compliance protocols, the BTR sales market will remain choked by prolonged due diligence.