Aparthotels: Regulatory risk of the Building Safety Act

Evolving assets

Over the past few years, there has been an increasing move away from the traditional hotel asset class with numerous operators moving towards flex-living spaces such as aparthotels. These assets typically bridge the gap between what would traditionally be viewed as a hotel and an apartment, providing flexibility for guests to stay for short or extended periods of time.

The Regulatory Backdrop

Following the Grenfell tower tragedy, the Government brought in the Building Safety Act 2022 (BSA) which was designed to improve fire safety in buildings with a particular focus on higher-risk buildings (those over 18 metres or at least 7 storeys in height). The development (including re-development) of higher-risk buildings is governed by the Building (Higher-Risk Buildings Procedures) (England) Regulations 2023 (the HRB Procedure Regulations) which introduces requirements for a gateway regime. Broadly, this requires developers to submit proposals to the Building Safety Regulator (BSR) for the development before work commences (Gateway 2) and once completed but before being occupied (Gateway 3). Since the introduction of the BSA and the HRB Regulations, the market has grappled with delays caused by the need to seek BSR approval to Gateway 2 and Gateway 3 applications which has stymied developments and created bottlenecks in approvals, putting pressure on the overall viability of schemes.

The Hotel exclusion

To date, the hotels sector has largely been immune to these delays (unless they are caught by mixed use schemes with an element of residential) given that hotels were excluded from the remit of the HRB Regulations by virtue of the Higher Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023 (the HRB Descriptions Regulations). However, the issue arises where neither the BSA nor the HRB Descriptions Regulations define the meaning of a hotel. 

Whilst there is no definition of what constitutes a hotel, the Government has published guidance (including in response to consultants around the HRB Descriptions Regulations) as to what constitutes a hotel which includes that these are buildings that “provide overnight accommodation for customers who stay for the purpose of leisure or business”. The Government further stated that “these buildings are also already regulated by the Fire Safety Order, and generally, these buildings are staffed 24/7, have multiple routes of escape, signage and emergency lighting to assist evacuation and have a higher level of detection and alarm systems than residential buildings”.

Potential Issues

With the increasing number of aparthotels or hotels offering longer term stays, there is uncertainty as to whether these assets would fall within the exclusion as they are typically not operated as a traditional hotel would be (e.g. not always with 24/7 staffing). The issue is further complicated where traditional hotels may be part of a wider development that also includes residential apartments as unless there are separate means of access, the BSR may treat the whole development as subject to the HRB Procedures Regulations, regardless of the hotel’s exclusion.

Increasing scrutiny

In light of the above, there is increasing focus from government and local authorities on developments which may be seeking to avoid the Gateways process by arguing they fall within the hotel exclusion. This scrutiny is only likely to increase as the number of aparthotels continue to come to market. Indeed, there is already a move in Wales to scrap the hotel exclusion altogether via the recent Building (Amendment) (Wales) Regulations 2025 which extend the definition of relevant building to include hotels and hostels. 

As the numbers of aparthotels continue to increase, interested parties such as developers and funders should carefully consider whether the particular asset they are investing in or developing may fall within the higher-risk buildings regime. This is fact dependant and something on which we have advised a number of our clients.