House prices, along with asking rents for properties, have been on an increase year on year for the past 20-plus years.
So, re-evaluating the amount of rent as a rent increase is something you’ll want to consider going forward. But in doing this, you’ll have to be fair in what you ask for, – ideally in line with the current market – and then have it accepted by the tenant.
When Can I Propose A Rent Increase?
Proposing a rent increase will depend on what type of tenancy you’re in right now.
On a periodic tenancy (a rolling contract), you’ll usually be limited to an increase no more than once a year, before needing to get an agreement from the tenant for anything further.
On a fixed-term tenancy – one that runs for a specified period – you’ll need the tenant’s go-ahead before you can increase the rent. If they don’t agree, you can’t make an increase until the fixed term ends.
A clause can be implemented in the tenancy agreement to include a rent review. This should state when the increase will happen, and the amount of notice the tenant will receive. It should also include a clear working-out or formula of how much the rent is due to increase, to inform the tenant from the start.
If the rent review clause has expired, or you didn’t include it in the first place, you can initiate the procedure of a Section 13 notice. This notice can only be used once a year, and the tenant should be given a minimum of one month’s notice for the increase of rent. If it’s a tenancy agreement any longer than a month, the tenant is entitled to a longer notice, usually around six months.
A landlord has the right to serve a Section 13 notice during the fixed term of a tenancy, but the rent increase won’t be able to come into effect until after that term has ended. Also, if for whatever reason the tenancy didn’t start off as a fixed term agreement, you cannot use Section 13 in the first year of their tenancy.
How Much Notice Do I Have To Give A Tenant Before Introducing A Rent Increase?
As a landlord, you should have a duty of care for your tenants, and this should reflect when you give them notice to increase the rent. A minimum of one month’s notice is required if rent is paid weekly or monthly. Or if it’s a yearly tenancy, it’s a six-month notice.
As I’ve already mentioned, rent cannot be increased in the first year of a fixed-term tenancy, the only exception is if a rent review clause is mentioned and signed for in the tenancy agreement. But generally, most assured shorthold tenancies will start as a fixed term type, meaning its unlikely rent can be increased in the first year.
Rent Increase – How Much Can I Increase It By?
If proposing a rent increase, the tenant should be accepting of it before it is enforced.
The proposed increase should be sensible, in line with average rents in the surrounding area, for a similar property. As an example, if a 3-bedroom house in the area is achieving on average £1000pcm, it would be unrealistic to think your 3-bedroom property can be justifiably increased to rent of £1800.
The average increase is in the region of between 2-5% annually. Stay informed about the rate of inflation, as rents will usually rise or decline in line with inflation.
A tenant is within their rights to refuse an increase in rent, and appeal to a tribunal if necessary to challenge the Section 13 notice. Nothing will change in this period; the tenant is still contractually obliged to pay the existing agreed rent amount until a final decision is made.
If a mutual agreement cannot be made regarding an increase, your tenant may decide to move on. So, bear this in mind, you could be potentially pushing a good tenant out for an increased amount of rent, and make a decision on which is more valuable to you.
Do some market research on your property’s surrounding area. Is your current rent far from what others are asking for?
If yes, consider the idea of looking at a rent increase. Make a reasonable judgement on what you think is fair for the tenant, – bearing in mind what they’re already paying you – and base the new asking rent on that.
Have a conversation with your tenant and listen to their feedback, it’d be a good idea to take a few examples you found from your market research to support your proposal.
If they’re continuing to be reluctant to the idea, and give you reasoning as to why they’re not willing to, or can’t afford the increase. Think about what kind of tenant they’ve been to you and your property until this point. If your tenants have been easygoing and on time with rent payments, you may want to be a little more reluctant to push them in case their replacements aren’t as reliable.
But if your tenants have been riddling you with the hassle, or there have been issues around the rent due dates, you might not be as reluctant to push them away and shouldn’t hesitate to look for replacement tenants.
Give us a call if you’d like a take-over on the management of your tenancy, in turn, we will oversee rent increases over time to ensure it’s in line with the current market rents.