How to Increase your Tenant’s Rent

We’ve seen an unprecedented rise in rents in the past year or so, and with landlord’s costs escalating, many are considering increasing their rents.

Before you approach your tenants about increasing their rent, there are a few things to consider.

Firstly, you should prepare yourself that your tenant may choose to serve notice rather than pay the higher rent.

It’s important to approach rent increases with sensitivity, remembering that a rent increase may render the property unaffordable for your tenant and this may lead to them leaving their home.

There is also a value in itself to having a good tenant who pays rent on time. In general, we recommend that you don’t increase the rent to full market rate, as this will encourage good tenants to stay. By the time you factor in re-advertising costs and a possible void, not to mention starting afresh with tenants who are unknown to you, it is often better to keep your rent below market rate.

Although many landlords don’t like to increase their tenant’s rent, there is merit in small annual increases, rather than large increases every few years.

How much can I increase the rent by?

Firstly, within the Private Rental Sector, there is no limit to how much you can increase the rent by, but it should be fair and realistic in accordance with market rents.

Check your tenancy agreement to see if the amount of increase is stipulated, as this may restrict how much you can increase the rent by.

The rent should never be increased above market rate in order to force a tenant to leave.

How often can I increase the rent?

You cannot increase the rent during a fixed term tenancy (unless this is pre-defined in your tenancy agreement), and you can only increase the rent once per year.

How to increase the rent?

It’s always worth approaching your tenants regarding the rent increase in the first instance. This way you can gauge what they can afford, and how open they are to continuing in the property.

You must give the tenant at least one month’s notice if their rent is paid monthly or more frequently. If rent is paid annually, you must give 6 months notice, for other rent payment schedules, the amount of notice you give should be equal to the payment period (so three months notice if rent is paid quarterly, for example).

Verbally – You can agree to a rent increase verbally, but this should always be followed up in writing.

Rent increase notice – You can increase the rent with a Section 13 notice (Form 4) which is available on the Government website. This is served on the tenant and does not require the tenant to agree or sign.

New tenancy agreement – You can sign a new fixed term tenancy with the increased rent stipulated. This gives both you and the tenant certainty for the fixed period. Click here to order yours now.

Can a tenant refuse to pay the higher rent?

If you serve a rent increase notice on the tenants, and they do not serve you notice to end their tenancy and vacate before the rent increase starts, they are legally obligated to pay the higher rate.

Likewise, if you have a signed contract for the higher rent, the tenant is legally obligated to pay it.

If you increase the rent, your tenant has the right to apply to a Rent Tribunal for a review of the proposed rent. The tribunal will assess the rent, and may adjust the rent up or down, based on an appraisal of market rents.

If your tenant remains in the property and doesn’t pay the higher rent, any monies due will count as rent arrears.

 

Please note, this article is applicable to England only.