Times are hard and Landlords are not immune from the cost-of-living increases. Top that off with an energy crisis and you’re probably counting your pennies with greater care.
Maintenance costs and the demand for rental properties can have a knock-on effect and soon you can find yourself considering rent reviews.
Here’s a few things you should keep in mind when considering upping a tenant’s rental cost.
Contents of this Blog...
What to expect when increasing rent...
Don’t expect your tenants to take this as good news. To some landlords, the prospect of having this conversation is very uncomfortable, and some fear confrontation. That’s why it’s important to approach rent reviews sensitively.
Some tenants might see this as unreasonable and completely object to you raising the rent.
They may refuse to pay anything at all. At this point, you’ll want possession of the property. Click here to learn more about what happens if a tenant doesn’t want to pay.
Can I up the rent?
Before deciding to increase the rent, you’ll need to double check whether you’re able to.
If your tenancy is a fixed-term tenancy you can only increase the rent during the fixed term if you have a ‘rent review clause’ in your tenancy agreement.
Note though that the rent review clause must be properly drafted and comply with the unfair terms rules.
So a clause which allows a landlord to increase the rent by however much he wants will not be enforceable.
Assuming you have no rent review clause, you will need to wait until the fixed term comes to an end.
Normally at this stage landlords or their agents will negotiate a new rent as a condition of ‘renewing’ the tenancy for a further fixed term.
If the tenant signs the new tenancy agreement then that’s it – the rent is increased.
What if my tenant doesn't agree?
Tenants don’t have to agree to the increase if they don’t want to.
They are quite within their rights to refuse to sign a new tenancy at an increased rent.
However, provided the tenancy is an assured shorthold tenancy and runs on as a periodic ‘rolling’ tenancy this is not a big problem as you can use the statutory rent increase procedure.
This is set out in section 13 of the Housing Act 1988 and provides for you to be able to increase the rent every 12 months while the tenancy is a periodic tenancy.
To do this you need to use the prescribed form, form 4, which is available on the gov.uk website. It’s a fairly complex form but there are notes that go with it. Your rent must be a ‘market rent’ and you need to give the tenants a one-month notice period.
During that month tenants can apply to the First Tier Tribunal for the proposed rent to be reviewed.
If they don’t do this, then the new rent will apply after the end of the one-month period.
Tenants rarely apply for a review but if they do, provided your rent is reasonable it should be upheld.
The Tribunal will be looking to see what the market rent is for that type of property and the personal circumstances of the landlord or tenant are not taken into account.
Not all tenancies are assured or assured shorthold tenancies.
If your tenant has a protected tenancy under the rent act, then the rules are stricter and in most cases, you will have to charge the ‘fair rent’ set by the Rent Officer.
If the tenancy is an unregulated ‘common law’ tenancy then if the tenant refuses to agree then your only option will be eviction – assuming the fixed term has ended first.
The Good, The Bad & The Outright Ugly.
There are good reasons to raise rent and bad reasons, too.
Your rent review can be motivated by good factors, like pricing to keep up with mortgage payments or the ever-changing standing of the current rental market.
Things like property maintenance costs can also motivate you to raise rent too.
You’ll want to stay away from raising rent for factors like greed or speculation.
Just because you think your property is worth more doesn’t always justify a rent increase. You should only increase rent to the market rent.
What if a tenant says no?
It’s in your best interest to try and meet a middle ground, as having a hostile tenant is never a good idea.
However as discussed above, so long as you allow the tenancy to run on as a rolling periodic, you will still be able to increase the rent once a year using the statutory notice procedure.
There is also of course the option to evict your tenant but this should only be resorted to in extreme cases as it takes a very long time to get a possession order and your tenant may stop paying at all in the meantime.
Closing note
One great piece of advice we’d want to give to you is to value your tenants.
Good tenants aren’t always easy to find. If you run the risk of losing a good tenant for the sake of a minor increase, then you should probably reconsider the rental increase to begin with.
By acknowledging that rent reviews aren’t always going to go smoothly, you’ll get a better understanding of how to approach them and what you should consider.
We hope this blog has prepared you to approach your rent review properly and has given you a few things to think about.
Special Thanks to LandlordLaw
We want to also thank Tessa Shepperson from LandlordLaw for her contribution to this blog. Tessa offers support, services & expert advice for property professionals. Visit Tessa’s website today by clicking this link.
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