We regularly get tenants coming into our office telling us they are looking to move house due to their landlords increasing the monthly rents. Whilst this is normal practice, there is a correct and legal way to increase the rent. Most landlords think that they can just increase it at any time, and by whatever amount they like. Unfortunately, this is not the case!
So, how should it be done properly?
It is not possible to review the rent during the fixed term of a tenancy unless there is a valid rent review clause, or the tenant agrees to an increase. If the tenancy is an assured or assured shorthold tenancy the landlord can use a formal procedure in Section 13 of the Housing Act 1988 to propose a rent increase. To do this, a prescribed form (Section 13 Notice) needs to be completed in full and served on the tenant. At least one month’s notice must be given to the tenant and if they do nothing during this period, then the rent increase will take effect. The start of the new rent increase must always be in line with the current rent due day.
The bit most landlords get wrong!
Apart from not using the correct template, under Section 13 of the Housing Act 1988, a rent increase to a tenant can only be issued once every 12 months. A landlord cannot indicate that it will go up again during the same 12 months, as per the legislation. This adds further fuel to the fire as many landlords are self-managing and have no idea of the extent of legislation they are legally obliged to adhere too.
This seems complicated, should landlords bother with rent increases?
In a word, YES! You must keep the rent on your properties at market value. If you don’t and you wish to sell the property as an investment in the future, the valuation of it as an investment won’t stack up to any investor. If your property should be achieving £750.00 per month and you haven’t done a rent increase in the last ten years and it’s still on £450.00 per month, any investor is going to understand that it’s not a safe bet and move on. What’s more, you won’t be able to increase the rent up by £100-£200 a month in one go, not only will this scare your tenant off, but it could be deemed as unfair and your tenants could challenge it by appealing to the Rent Assessment Committee.
We would always advise you to increase the rent by small amounts at 12-month intervals and only in line with the current market values! Good, reliable, rent-paying tenants should be looked after and increasing their rent too much, may cause your tenants anxiety and stress. This could cause them to leave and you would have to find another tenant, which why this should be avoided – essentially, you don’t want a good tenant moving on.
We hope you found this blog useful and if you require any more information please contact us on 01793 520 721.