Rent rises have always been a tricky negotiation point. Push them too high and you risk damaging a trusted tenant relationship or losing a tenant completely. Alternatively, you may fail to increase rents regularly, meaning that your rental property becomes out of sync with the rest of the market and leading to a big shock for tenants when you do finally decide to increase your prices.
The current status
Under current regulations, you can raise rents by including a rent review clause in your tenancy agreement which will specify when, and ideally by how much, you can raise rents. It is usually to market rates and while tenants have a right to appeal, they are sometimes put off doing so since appeal decisions may not always be in their favour.
Currently, for periodic tenancy landlords can usually not increase the rent more than once a year without your agreement and for a fixed term it can only be increased if you agree – if not, you must wait until the fixed term ends. Tenants paying weekly or monthly need at least one month’s notice while those on yearly contracts need six months.
Rent increases after the Renters’ Rights Bill
However, the rules are changing. After the Renters’ Rights Bill comes into force you will be limited on both when and how you can increase rents, as well as the asking rent you can set in the first place. Rent review clauses will also no longer be a feature of tenancy agreements.
At the start of a tenancy, you or your letting agent must publish an asking rent and are not allowed to ask for, encourage or accept any bids that exceed this set price. This aims to end the practice of unscrupulous landlords encouraging bidding wars to push up prices.
During a tenancy, which will be periodic under the new legislation, you will be able to increase rents, but it must be to an agreed market price which is what would be achieved if the property was newly advertised for rent. You must serve a section 13 notice clearly stating the revised rent and give at least two months’ notice of it coming into force.
If tenants object, they will be able to appeal to an independent first-tier tribunal who will make a judgement on whether the increase is justified and fair or determine the new market rent if required. This aims to end excessive above-market rents designed to push tenants out. Currently, tenants can be wary of appealing to a tribunal since such bodies also have the power to increase rents beyond what the landlord originally proposed. Additional changes in the Renters’ Rights Bill will end this practice while any rent increases will no longer be backdated but instead will apply from the date of the tribunal’s decision.
Adhering to the new rules will ensure that your rent prices are both fair and legal.