How Does A Landlord Raise The Rent?
There are many reasons why a landlord may need to raise the rent on a property, from rising mortgage costs to unexpected maintenance. However, there are strict laws around rent increases. Landlords cannot simply demand more money as and when they wish.
So before approaching your tenants with the news of rent changes, take a look through our list of all the circumstances that need to be in place to keep you covered and on the right side of the law.
Tenancy types and rent increases
The time at which a landlord can raise the rent will often depend on the nature of the tenancy.
If the tenancy is periodic (that is, it is on a rolling monthly or weekly basis), the landlord can only raise the rent at maximum once a year. It is rare for new tenancies to be periodic, but a tenancy may become periodic if a fixed-term assured shorthold tenancy (AST) (the most common kind of tenancy) expires.
For fixed-term tenancies, landlords can only increase the rent if tenants agree. If tenants do not agree, then rent can only be increased once the fixed term ends.
There are different rules for lodgers. If your lodger has a fixed-term tenancy, the rent cannot be increased during that term unless there is a specific clause in the agreement allowing this. However, if there is no fixed-term agreement, landlords can increase a lodger’s rent when and by however much they see fit.
How much notice must a landlord give before raising the rent?
For assured shorthold tenancies, the amount of notice a landlord must give before increasing the rent depends on the frequency with which rent payments are made or, again, the length of the tenancy. If rent is paid weekly or monthly, the landlord must give at least one month’s notice. In the case of yearly tenancies, the landlord must give at least six months’ notice.
What about rent increases for regulated tenants?
If a tenancy began before 1989, the tenant is likely to be ‘regulated’. In the case of a regulated tenancy, either party can apply to the Valuation Office Agency to have a ‘fair rent’ set. Once this is agreed, the landlord cannot charge more than the fair rent, and it cannot usually be reevaluated more than once every two years.
How to propose a rent increase
If the tenancy agreement lays down a procedure for increasing rent, you as the landlord must follow this. If no such clause is included in the contract, there are three ways in which a landlord can propose a rent increase:
Renew a tenancy at the end of the fixed term, but with a revised rent from the start of the new tenancy
Use a section 13 notice, used when a fixed tenancy has expired and the tenancy has become periodic
Negotiate a new rent with the tenant, and produce a written record of this agreement
Remember that these three methods can only be used if the landlord’s other obligations, detailed above, have been met.
Is the rental increase it worth it?
It can be tempting to hike the rent at the end of every tenancy. However, there may be sound business reasons for not doing this, or for increasing the rent by a lower amount. Good tenants, who pay the rent on time and keep the property in good order, are a landlord’s most important asset. If you’re happy with your tenants, you should consider whether or not a rent increase is sensible. If it will persuade them to leave, the costs of re-advertising the property, carrying out another round of referencing, and so on, may cost you more than the increase – and there’s no guarantee that you will be as satisfied with the new tenants once they’re in the property.
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