Increasing Rent as a Private LandlordWritten By PropertyLoop February 12, 2021
Over recent months the demand for rental opportunities across the Uk has skyrocketed, seeing void periods fall by the wayside as landlords are finding tenants in record time. For renters, however, this has not just led to fierce competition for their next home, but also see them pay a record amount of rent to secure their tenancy. While the associated costs of renting don’t look to be changing any time soon, landlords may be wary to increase rent in order to maintain their tenancy after the tremendous losses faced over the last 18 months.
When Can a Landlord Increase Rent?
As can be expected whilst landlords will naturally wish to keep their rent in line with the current market rates, increasing the amount of rent the occupants of the rental property are expected to pay during the tenancy could deter them from renewing, resulting in the search for new tenants and less long-term financial security for the landlord.
With this being said, rent increases are somewhat common and it is possible for the owner of the property to increase the amount of rent their residents pay each month, even if the fixed term is yet to come to an end.
Providing that both the tenant and the landlord come to a mutual agreement regarding the rent increase, both parties could simply sign a new tenancy agreement that enforces a revised figure for rental charges. However, this would only be valid if the tenant first agrees to the increase and signs the agreement.
Alternatively, the landlord may have included a rent review clause within the terms of the tenancy agreement, empowering them to increase the rental fee that comes with the tenancy.
What Is a Rent Review Clause?
A rent review clause is one of many terms comprising the tenancy agreement and clearly, details to both parties of the tenancy both when the rent will be increased and how much by. The review clause will also make it clear to the tenant how much notice they will receive prior to the increase being implemented. Further to this, the landlord should also issue the tenant with the methodology behind how the rent increase is calculated for full transparency on how much they are likely to pay after the increase.
What is a Section 13 Notice?
Enforced through the 1988 Housing Act, landlords are able to implement a section 13 notice to increase the amount of rent their tenants are obligated to pay. However, landlords are prohibited from issuing their tenants with more than a single section 13 notice every 12 months. Additionally, landlords are further required to provide their tenants with an adequate amount of notice when serving a section 13, with at least a months’ notice being given if the tenant pays rent each month.
The occupants of the rental property are able to appeal the proposed rent increase during this notice period. The rent increase will then be presented to the residential property tribunal service, with the rent increase being supported if the amount is deemed to be fair.
What Is a Fair Rent Increase?
When deciding the amount that the rent should increase by owners should keep in mind both the current demand for rental properties in their area and what similar rental opportunities are offering for a similar price. With multiple deposits to pay, high inital costs of renting could be pricing out many tenants that would otherwise prove to be an idyllic fit for the rental opportunity. Whilst landlords will naturally need to establish a level of rental income that allows them to settle buy to let mortgage payments, maintenance fees and letting agent charges, but lower rents could go a long way in securing longer tenancies, saving landlords hundreds in agency fees.
What if Tenants Refuse to Pay Increase?
As can be expected not all occupants will be receptive to the idea of a rent increase, however, if the rent increase has been unsuccessfully appealed and the landlord and tenant are still unable to reach an agreement, the increase must still be paid. If the full amount of requested rent is not provided it is likely to be treated as withheld rent, leading the landlord to pursue eviction and repossession of the rental property.
How Do You Notify Your Tenants of a Rent Increase?
Some landlords have recommended that rent should be incrementally increased, with the argument being that tenants are less likely to challenge a significant increase, but a series of smaller increases will not only provide the tenants with more time to adjust to the higher rent, but ensure that all parties in the tenancy are treated fairly, with no sudden changes impacting either party’s financial situation.
If landlords intended on increasing the rent once the fixed term comes to an end it is generally advisable that they notify the exiting occupants in order to give them ample time to either find new rental accommodation or negotiate the terms of a new tenancy with the landlord.
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