UK hospitality and residential-adjacent property have seen aparthotels become one of the more attractive asset classes over the last few years, combining the yield profile of a hotel with the flexibility of serviced accommodation.
But for developers and funders weighing up a scheme, there’s an important regulatory question at play: does this building count as a hotel for safety law purposes, or does it fall into a much more demanding regime instead?
The answer isn’t always clear cut, and getting it wrong can pose consequences for programme cost and financing.
Why hotels are often exempt, and why aparthotels often aren’t
The Building Safety Act 2022, introduced in the wake of the Grenfell Tower tragedy, created a stricter regulatory regime for what the law calls ‘higher-risk buildings’. Broadly speaking, a building falls into this category if it’s 18 metres or taller, or has seven or more storeys. It also needs to contain at least two residential units.
Buildings that meet this threshold face stricter regulations, such as additional approval stages before construction can begin, as well as ongoing registration and safety reporting once occupied. This responsibility rests with a named individual or organisation, known as the Principal Accountable Person.
Standalone hotels are generally excluded from this regime. Government commentary supporting the exclusion notes that traditional hotels are staffed around the clock, have multiple escape routes, and typically have stronger fire detection and alarm provision than residential accommodation. Therefore, the heightened regulatory burden isn’t considered necessary.
Aparthotels sit in a murkier territory. They often involve self-contained units, less continuous staffing, and guests who may stay for extended periods, and the legislation doesn’t have a clear definition for this type of accommodation. Whether a particular scheme benefits from hotel exclusion will depend on the specific facts, such as how the building is staffed, how units are accessed, and how the operation runs day to day. A commercial label of ‘aparthotel’ has no bearing on the legal analysis, and the gap between branding and classification is where developers and funders can come unstuck.
The risk of mixed-use schemes
Many aparthotel developments sit within, or alongside, buildings that also contain purely residential units, retail space, or other uses. Where that’s the case, the question isn’t whether the aparthotel element itself would be exempt, but whether the building as a whole falls into the higher-risk category, because of what else is in it.
An aparthotel or hotel element can be treated separately from the rest of a mixed-use building, but only where it operates as what the regulations describe as an ‘independent section’ – a concept that hinges on how that part of the building is accessed and functions in relation to the rest of the structure. Where the hotel or aparthotel element is more integrated with residential parts of the scheme, the separation argument becomes much harder to sustain. The safer assumption for planning purposes is that the whole building could be caught.
The construction phase isn’t the only time to consider this. A scheme that falls within the higher-risk regime needs formal approval from the Building Safety Regulator at key design and pre-occupation stages, on top of the usual planning and building control processes. Missing or mistiming those approvals can hold up a project at the exact point developers and funders rely on certainty.
The commercial understanding
For developers, the risk is largely one of timing and cost. If a scheme is wrongly assumed to be exempt and is later found to fall within the higher-risk regime, design decisions, documentation, or even construction methods that have already been signed off may need revisiting. This can be considerably more expensive to unpick after the fact than to plan for from the start. The additional approval stages built into the regime also take time, and a development programme that doesn’t account for them can quickly fall behind schedule.
Developers should also be aware of the Building Safety Levy, which came into force on 1 October 2026. Although the levy is a separate regime and does not apply simply because a building is classified as a higher-risk building, residential and mixed-use developments may need to consider both issues in parallel. In practice, that means building safety classification, regulatory approvals and potential levy exposure should all be assessed at an early stage and properly reflected in development appraisals and funding assumptions.
The concern is slightly different for funders. Lenders are increasingly aware of building safety risks as part of their due diligence, and a scheme whose regulatory status hasn’t been properly worked through represents an unquantified liability inside the security. That uncertainty can affect everything from the terms on which finance is offered to the conditions attached to drawdown, particularly where a project is close to, or likely to cross, the height and storey thresholds that trigger the higher-risk regime.
Buildings that fall within the regime carry continuing obligations once occupied, including registration, safety case management and reporting duties. These sit with whoever takes on the Principal Accountable Person role. For an aparthotel operator or investor acquiring a completed scheme, that’s a cost and responsibility that needs to be factored in and clearly allocated.
Getting ahead of the issue
Working through how a scheme will be staffed, how units will be accessed, and whether any element can stand as an independent section, ideally happens before design is finalised and certainly before funding is committed. This means any additional approval requirements, costs or programme implications can be built into the plan from day one rather than scrambling to resolve it further down the line.
The same analysis applies if a scheme changes during development. A shift in operating model, a change to how units are accessed, or the addition of residential accommodation elsewhere in the building can all affect the original classification, even where the physical building hasn’t changed drastically.
Aparthotels aren’t inherently riskier than any other form of hospitality or residential development, but the regulatory uncertainty around how they’re classified deserves attention much earlier than it often gets.
Our Commercial Property team work with developers, operators and funders to assess building safety classification at the outset of a scheme. We make sure that risk is properly understood and allocated before significant time or money is committed. If you’re developing or funding an aparthotel scheme and want to understand how it’s impacted by the Building Safety Act regulations, we can look at your circumstances and offer support with next steps.
