Raising rents can be a delicate subject for a landlord and their tenant. As a landlord, you’ll want to ensure you are maximising your rental income to cover your costs, make a healthy margin and remain competitive in the market without risking losing tenants who may feel such rises are unfair. Inflation, increased maintenance and mortgage costs and improvements to the property could all warrant a rent increase. Your tenants, however, may feel differently.
Rent reviews
Many existing tenancy agreements will include rent review clauses. These will outline the procedure agreed for increasing rent at the start of the tenancy and must be followed to the letter.
For a fixed-term tenancy, you can only increase the rent if the tenant agrees or if there is a rental review clause in the agreement. Otherwise, you must wait until the end of the tenancy agreement term. For periodic tenancies, rent increases are generally only allowed once a year.
How to manage a rent increase
Upon the end of a fixed term, an increase can be made by renewing the tenancy agreement but with a higher rent. Landlords should provide at least one month’s notice of the increased rent and there must be a written agreement that both parties sign to agree to the increase. Tenants can also appeal against an increase in rent.
Complying with these rules is not only a legal obligation but is also important for keeping tenants onside. For this reason, if a tenant wants to negotiate a proposed rent increase it may be worthwhile considering their argument if they are a trusted tenant. It may be that you can offer something of value, such as a new appliance or a property revamp, could persuade them to pay more. A pattern of yearly small rises will also be more acceptable than a sudden hike after years of a static rent.
How things will change with the Renters’ Rights Bill
The existing process for increasing rent will change once the Renters’ Rights Bill comes into force and all tenancies become periodic. At that point, you will only be able to increase rents once a year and it must be to market rate – defined as the price you would get if you were newly advertising the property for rent.
To enforce the new rent, you will need to serve a section 13 notice which will detail the new rent. The notice period required will also double, extending to at least two months rather than one. Tenants can also challenge the increase at a first-tier tribunal.
Although they can already appeal under the existing system, tenants risk a tribunal raising the rent beyond what the landlord proposed – ie higher than the tenant was initially objecting to. However, under the Renters’ Rights Bill this will no longer be possible, and rents will only be increased to what the landlord proposed. The changes will also end the process of backdating rent increases when a challenge is made, with the new rent instead applying from the date of the tribunal determination.
For more information on how Kings Group can assist you on your letting journey, please contact one of our branches in Essex, London or Hertfordshire today. We also offer a free and instant online valuation to give you an idea of how much your property could be worth on the current market.
