As property specialists who speak to landlords on a daily basis, we’re acutely aware that many landlords are facing increasing costs, from higher mortgage costs to rising maintenance bills and leasehold-related expenses. So, in these challenging times, it’s crucial for you to understand when and how you can adjust your rental income to cover these escalating expenses – plus why it’s better to increase regularly rather than in one large chunk.
We understand that rent increases can be a delicate issue for both landlords and tenants. While landlords can sometimes be depicted as greedy, increasing rents indiscriminately, we understand that for the overwhelming majority of landlords it is a necessity and not a process they enjoy. In fact, a survey conducted by property finance broker Finbri recently discovered that 52% of landlords have expressed concerns over rising costs due to inflation.
Plus, the process itself can be stressful and you have to navigate a variety of legal obligations to ensure any rent increase is fair and compliant with the law. That’s really important. Understanding the legal processes you should follow will not only keep you informed but also empower you to make the best decisions for your property.
Regular, incremental increases are fairer on landlord and tenant
Though it can feel awkward to raise rents, renting out property is a business and needs to be treated as one if you want to reap the benefits. Rent increases are inevitable, and tenants generally accept this. The longer you leave it before increasing rent to be in line with the market, the harder it is to raise it by a significant amount to cover your costs. Incremental rent rises are more palatable to tenants and more likely to be accepted, so how should you go about it?
What’s in your tenancy agreement?
Understanding the type of tenancy agreement in place is your first crucial step in raising rent. The rules differ for fixed-term and periodic tenancies.
Fixed-term tenancy
A fixed-term tenancy is typically set for a specific period, such as six, 12 or 24 months. The rent is usually fixed for the duration of this term. However, there are circumstances under which rent can be increased:
- Rent Review Clause: Typically negotiated at the start of the tenancy, rent review clauses state when and how the rent can be increased.
- Mutual Agreement: Rare, but in the absence of a rent review clause, you and your tenant can mutually agree to a rent increase during the fixed term. This agreement should be documented in writing to avoid future disputes.
Periodic Tenancy
A periodic tenancy is a rolling contract that continues on a month-to-month or week-to-week basis after the initial fixed term ends. For periodic tenancies, the process for increasing rent is more straightforward but still requires proper procedure:
- Proper Notice: Using a Section 13 Notice, you must provide the tenant with a proper notice period before increasing the rent. This notice period typically matches the rental payment frequency, which is usually one month.
- Formal Written Notice: The notice must be in writing and state the new rent amount and the date it will take effect. It must comply with the rules set out in the Housing Act 1988.
Issuing a Rent Increase Notice
When you decide to increase the rent, you must issue a formal rent increase notice. Here’s how to do it correctly:
- Timing: Ensure notice is given with enough lead time. For monthly periodic tenancies, this is typically one month. For yearly tenancies, it may be longer.
- Content: The notice must include the current rent, the proposed new rent, and the date from which the new rent will be effective. It should also state that the tenant has the right to challenge the increase if they believe it is unreasonable.
- Delivery: Send the notice using a reliable method, such as recorded delivery, to ensure proof of receipt.
Rent Control Areas
In some parts of the UK, rent control measures are in place to limit excessive rent increases. Landlords operating in these areas must adhere to local regulations, which may restrict how much they can raise the rent. It’s essential to check with local authorities to understand any rent control rules that apply.
Tenant’s Right to Challenge
Tenants have the right to challenge a rent increase if they believe it is unreasonable or not compliant with the law. They can apply to a First-Tier Tribunal (Property Chamber) for a decision on whether the proposed rent increase is fair. You should be prepared to justify the increase by providing evidence of current market rates and any improvements made to the property.
Best Practice for Landlords
To ensure a smooth process and maintain a good relationship with tenants, you should follow these best practices:
- Communicate clearly: Discuss potential rent increases with tenants well in advance. Clear communication can help avoid misunderstandings and foster a positive landlord-tenant relationship. Be upfront and honest about the reasons for raising the rent, showing consideration for your tenants’ circumstances and fostering a positive relationship.
- Be fair and reasonable: Ensure that any rent increase is fair and in line with local market rates. Unreasonable increases can lead to disputes and legal challenges. By being fair and reasonable, you show consideration for your tenants’ circumstances, and this goes a long way when you’re trying to have a mutually respectful relationship.
- Seek legal advice: If you are unsure about the process or legal requirements, you should seek legal advice to ensure compliance with all relevant regulations.
By following these guidelines, you can effectively manage rent increases while maintaining a positive relationship with your tenants and ensuring compliance with the law.
Navigating rent increases can be complex, but you don’t have to do it alone. If you’re considering raising your rent or need advice on managing your rental property, we’re here to help. Contact us today for personalised guidance that ensures you’re making informed decisions for your property business while maintaining positive tenant relationships. With our support, you can navigate the process with confidence, knowing that you have a team of experts behind you.
“I’ve experienced nothing but competent professionalism from the folk who’ve managed my property over the past few years. Having dealt with one of the bigger commercial firms previously, it’s been an absolute pleasure to know that things were in such safe hands. I would recommend Grace Miller to anyone, that’s 100% due to the quality of the people I’ve dealt with.”
– D Morgan.
Since opening Grace Miller & Co. in 2000, we’ve given all our clients proactive, professional and personable care. We’re very proud of the reputation we’ve built and the client reviews we’ve received. If you have a property in London or Surrey and would like to benefit from our outstanding service and unrivalled knowledge in residential lettings, sales and block and estate management, please contact us today.
