Landlords: A guide to increasing rent
Increasing rent could be an inevitable scenario if you have longstanding tenants. Here, we explore when rent increases might be appropriate, how to approach the subject and implement changes.
We’ve broken this guide down to make it easier for you to find what you need:
- Can landlords raise rent every year?
- When can a landlord increase rent?
- How much notice do landlords need to give to increase rent?
- How much can landlords increase rent by?
- Can tenants refuse a rent increase?
- How to propose a rent increase
Can landlords raise rent every year?
As a landlord, it’s within your rights to increase rent every year depending on the type of tenancy agreement you have in place.
If a rent increase is something you’re considering, it’s important to consider all the consequences. Regular annual rent rises could eventually out price your tenants, leaving you with an empty property and no rent at all.
It’s also easier to discuss rent rises with tenants if there are clear and justifiable reasons for the increase. For instance, inflation, increased mortgage repayments or the cost of maintenance.
When can a landlord increase rent?
Broadly speaking, tenancies fall into one of two main types which will affect when you can increase rent:
These tenancies run for a set period which is agreed from the outset. Under the terms of these contracts, you can’t increase the rent until the contract ends. The only exception is if your tenant agrees to a rent rise.
If your tenant does agree to a rent increase, you’ll need to issue a new contract detailing the changes.
You can put a rent review clause into a fixed-term contract, which will give you the opportunity of discussing a rent rise, if you need to.
If you decide to add in a rent review clause, you should also set out a specific increase or formula that will determine the rise. Doing this can also make it harder for tenants to challenge rises as the terms would have been clear when they signed the tenancy agreement. Although doing this doesn’t guarantee that the percentage or formula will adequately cover the reasons behind the rent increase, especially if the contract was agreed a number of years ago.
These tenancies run on a rolling basis, usually week by week or month by month. If you have this type of agreement in place, you can’t increase the rent more than once a year.
How much notice do landlords need to give to increase rent?
If your tenants pay rent weekly or monthly, you must give them at least one month’s notice. If the agreement is annual, you’ll need to give them six months’ notice.
This only applies to periodic tenancies. If you’ve got a fixed-term agreement, you can only raise rent when the contract ends.
How much can landlords increase rent by?
A good gauge is to look at like for like properties within your local market and decide what is fair based on this.
It’s also in your interest to charge realistic rent so that you avoid having an unoccupied property. If other properties in the area are charging much lower rents, then your property won’t be an attractive prospect in comparison.
Can tenants refuse to pay more rent?
Tenants can refuse to pay an increase in rent. But if that’s the case, they must still pay you the normal rent until the issue is resolved.
If you and your tenant can’t agree an increase and you feel your request is justified and fair, you have two options:
Serve a Section 13 notice
This refers to Section 13 of the Housing Act 1988. It’s a formal process that notifies your tenant of a rent increase. It can only be served if you have a periodic tenancy, and can only be issued once every 12 months.
Like other notices to serve, it also has to be carried out in a certain way and you’ll need to fill out Form 4 from the assured tenancy forms.
Serve a Section 21 notice
If you’ve broached the subject of a rent rise but your tenants refuse (whether you have a periodic or fixed-term contract), you could issue a Section 21 notice. This notice formally requests that your tenants leave at the end of their contract.
If you issue a Section 21, you’ll need to give your tenants at least two months’ notice. However, because of the Covid-19 pandemic, this has been extended and you can find updated rules about notice periods at GOV.UK.
How should landlords propose a raise in rent?
While it’s at your discretion to request a rent increase, it’s also important to think about how it might impact your tenant.
There are fundamentally three ways to ask for a rent increase:
- Wait until the existing fixed-term tenancy ends and issue a new contract with revised rent.
- Agree an increase and re-sign a new contract noting the change.
- Issue a formal Section 13 notice.
Whichever you choose, you should give your tenant as much notice as possible. It could also help to set out a notice of rent increase in a letter which includes the reasons why you feel a rise is necessary.
If your tenant can’t meet the suggested increase but is willing to pay a little more, it could also be worth compromising rather than losing them as a tenant altogether.
Protecting your assets with award-winning landlord insurance
Being a landlord comes with an increasing number of responsibilities but that shouldn’t be at the expense of protecting your own assets.
At Alan Boswell Group, we can tailor our award-winning landlord insurance to suit your needs. From essentials like buildings and contents cover to landlord liability, speak to one of our experts on 01603 216399 to see how we can help. Alternatively, take a look at our landlord insurance hub for updates and advice.