Concessions
A concession is a reduction from the headline rent granted to secure or retain a let: commonly rent-free weeks, a discounted rate for a fixed period, or a re-sign discount. Concessions reduce the net effective rent and, under both IFRS 16 and FRS 102 (September 2024 edition), must be spread across the tenancy term so that reported income reflects the economic rent.
What is a concession in property lettings?
A concession is a reduction in the rent a tenant actually pays during a tenancy. The operator accepts less than the headline rate to secure or retain a let. In PBSA and BTR the most common forms are a rent-free period at the start of the tenancy, a reduced weekly rate held for a fixed number of weeks, and a discount offered to a resident who re-signs for another year. Operators grant concessions in two situations: lease-up, to fill a new scheme or a void; and retention, to keep a resident who might otherwise leave. Both have the same financial effect — the rent collected is lower than the advertised rate for some or all of the term.
How do concessions affect the rent you actually earn?
Net effective rent (NER) equals total rent receivable over the tenancy term minus the value of concessions, divided by the term length. In PBSA, the premium academic-year studio term is 51 weeks, not 52. The 52nd week is a turnover window: operators need it to inspect, deep-clean, and prepare the room before the next student arrives, so it is not a letting period. A studio let at £200 per week for a 51-week term with two weeks rent-free collects 49 weeks at £200, which is £9,800 receivable. Divided by the 51-week term, the NER is £192.16 per week. The headline rate and the economic rent differ from the first day of the tenancy.
In BTR the position is different. Under the Renters' Rights Act 2025, large-scale landlords cannot use fixed terms and must use rolling periodic tenancies. There is no fixed 51-week academic cycle and no mandatory turnover week, so BTR concessions are typically tied to lease-up periods or renewal windows rather than academic calendars.
When should you use a concession, and when an incentive?
Use a concession when you want to move the rent figure itself. The tenant pays less, the net effective rent goes down, and the revenue line is directly affected. Concessions are the right tool when you need to fill a void quickly, close a re-sign where the resident is price-sensitive, or manage a new scheme's lease-up without cutting the advertised headline rate visibly.
Use an incentive when you want to add value without touching the rent. An incentive is a benefit given to the tenant that does not change the contracted rent: a gift card, a contribution to moving costs, a prize draw entry, a month's broadband paid. The contracted rent stays the same; the cost sits in operating expenditure, not revenue. Incentives work when the headline rate needs to stay intact for valuation or reporting purposes, or when the operator wants to differentiate on service rather than price.
The practical test: if someone asks "what is the rent?", a concession changes the answer; an incentive does not.
How are concessions recognised in reported income?
Under IFRS 16, a lessor recognises operating-lease income on a straight-line basis across the full tenancy term. Concessions are lease incentives: they reduce the lease payments recognised as income, so the economic rent rather than the headline rate appears in the accounts, and every period of the tenancy reflects the same effective rent. A two-week rent-free at the start of a 51-week tenancy does not produce a zero-income opening followed by full-rent periods; the value of the concession spreads evenly across all 51 weeks.
FRS 102 (September 2024 edition, mandatory for periods beginning on or after 1 January 2026) applies the same principle: operating-lease income is recognised on a straight-line basis and lease incentives, including concessions, reduce that income across the full term.
A benefit that is conditional on a specific tenancy being signed is a lease incentive and reduces rental income over the term. A benefit used as general marketing not tied to a particular letting sits in operating costs. The line between the two is a judgment call that finance teams should document.
Key takeaways
- A concession is a rent reduction, most commonly rent-free weeks, a held discount, or a re-sign offer. An incentive is an added-value benefit that does not change the rent. Only a concession affects the net effective rent.
- PBSA premium studio tenancies run 51 weeks. At £200/week headline with two weeks rent-free, the NER is £192.16/week. The 52nd week is a turnover window, not a letting period.
- BTR operators under the Renters' Rights Act 2025 use rolling periodic tenancies with no fixed 51-week cycle. Concession structures in BTR follow lease-up and renewal periods.
- Under IFRS 16 and FRS 102 (September 2024 edition), concessions spread across the full tenancy term in reported income. The value cannot be isolated to the free-rent period.
- A benefit tied to a specific tenancy is a lease incentive (reduces revenue). A benefit used as general marketing is an operating cost. The distinction requires a judgment call and should be documented.
How Cloudfox Helps With Concessions
If a concession is agreed in the PMS but does not flow through to Xero, reported income shows revenue that was never collected. We set up Xero, ApprovalMax, Mayday, and Syft so concessions move from agreement to financial reporting: ApprovalMax controls the approval workflow so no concession is committed without the right sign-off, Xero records adjusted revenue at tenancy level, Mayday spreads the concession straight-line across the full tenancy term so every period reflects the economic rent rather than the headline rate, and Syft surfaces net revenue at scheme and portfolio level. The result is income reporting that reflects the economic rent, not the headline rate. Find out more at cloudfox.it/finance-stack.
Frequently Asked Questions About Concessions
What is a concession in PBSA or BTR?
A temporary reduction in the rent payable under a tenancy, granted to secure or retain a let. Common forms are rent-free weeks at the start of a tenancy, a reduced rate held for a set period, or a discount offered to a re-signing resident. Concessions reduce the rent actually collected below the advertised headline rate.
Why do PBSA studio tenancies run 51 weeks, not 52?
The 52nd week is a turnover window. Operators need time to inspect, clean, and prepare the room before the next student arrives. The premium academic-year letting period is therefore 51 weeks, and the NER denominator for a PBSA studio is 51 weeks, not 52.
What is the difference between a concession and an incentive?
A concession reduces the rent payable and directly reduces the revenue line. An incentive is an added-value benefit (a voucher, gift card, contribution to moving costs) that does not change the contracted rent and is recognised as an operating cost. Both are used to attract or retain residents, but only a concession reduces the net effective rent.
How does a concession affect the net effective rent?
NER equals total rent receivable over the term minus the value of concessions, divided by the term length. Every concession reduces the NER below the headline rate across the whole term, not just during the period when the tenant pays less.
How is a concession recognised in the accounts?
Under IFRS 16 and FRS 102 (September 2024 edition), operating-lease income is recognised on a straight-line basis over the tenancy term. A concession spreads across every period of the tenancy. It cannot be isolated to the weeks when the tenant pays a reduced rate.