I should stress that I don’t see it as ‘the norm’ to increase the rent as a matter of course. I particularly dislike tenancy agreements that have onerous automatic rent increase clauses built into them. In fact, I would far rather reward a tenant by not increasing the rent (assuming they have paid on time each month and looked after the property), thus retaining them for a longer period.
Unfortunately, an increase in legislation and the negative impact from changes in taxation towards landlords has altered my view on this in recent years. Adding to that are the significant interest rate increases over the past year (some landlords have seen their buy-to-let mortgage payments triple!) alongside the fact that rents on new tenancies are soaring; all of which makes it hard to justify not increasing the rent at the moment. There are, however, rules about how this is done, as well as the need for compassion to navigate what is a sensitive subject.
The rent cannot be increased on tenancies that are still within their ‘fixed-term’ period (normally 6 or 12 months) without the tenant’s agreement. For those that fall outside this, the rent can be increased by the landlord by using a ‘Section 13’ document with at least one month’s notice (although I typically give 6-8 weeks’ notice to ease the process). The rent cannot then be increased for at least another year (unless the tenant specifically agrees to it).
A rent review will assess what the market rate is for the property by analysing what is currently on the market (just like you would when you initially let a property). You may also consider the tenant’s conduct throughout the tenancy, their payment record and affordability. Showing comparable properties to tenants can soften the blow of a rent increase if they are unaware of the going rate, especially when rents have increased quite a lot. Any increase should be ‘fair and realistic’ and ideally made in agreement with the tenant, otherwise they can refuse the increase and ask a tribunal to set the rental figure.
Tenants should be aware though that these rent tribunals can set the rent at a higher amount than the landlord had originally requested! This is why tenants also need to be realistic when subjected to a rent increase if it is in line (or better than) the market rate for the property. In one such case in May of this year, a landlord had asked to up the rent of their property in Surrey from £1,260pcm to £1,300pcm. The tenant disputed this and took it to the rent tribunal…who set the rent at £1,540pcm!
I typically recommend meeting tenants half-way in regards to the amount of any rent increase i.e. keeping it below market value so they have an incentive to stay in the home they have looked after and paid rent for throughout their tenancy. Ultimately though, this is the landlord’s decision; some will never increase rents (thus not ‘rocking the boat’ so tenants stay longer; aware of the re-let costs and possible need for refurbishment if the current tenant were to leave), some want the maximum rent at all times (likely seeing a higher turnover of tenants / risk of affordability issues or resentment from tenants arising), whilst others take the middle ground.
The average rent in Chichester is currently £1,300pcm, which is an increase of 8.3% compared to the £1,200pcm average figure from one year ago. This is slightly below the average increase seen across the UK, which has been 10.4% in the last 12 months (with UK rents averaging £1,229pcm overall / £1,027pcm excluding London).
Despite quickly rising prices, rental homes are continuing to let at speed and many landlords are still being met with long queues of prospective tenants wanting to view and rent their property. As market rents have increased greatly, many landlords are taking the opportunity to offset some of the financial impact from increasing legislation, taxation and interest rates by passing on rent increases to current tenants. The sad reality for these tenants is that if they don’t want to pay the increase there are a number of prospective tenants chomping at the bit to move in (who will perhaps pay even more for the property!).
If you’re a landlord and would like a ‘rent review’ for one of your properties, or if you’re a tenant facing a rent increase and would like an impartial opinion on its validity, please get in touch and I’ll be happy to provide assistance.
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