A Landlord and Tenant Guide to Rent Increases
With mortgage rates and repair bills going up, landlords are having to consider rent increases. In this blog, our landlord and tenant solicitors provide a guide to rent increases.
Online and London Landlord and Tenant Solicitors
For landlord and tenant legal advice call the experts at OTS Solicitors on 0203 959 9123 or complete our online enquiry form.
Can a landlord increase the rent?
A landlord’s ability to increase the rent depends on the nature of an assured shorthold tenancy and whether the tenancy agreement contains a review clause.
Assured shorthold tenancies are normally for 6 or 12 months. During the fixed-term tenancy, a landlord can only increase the rent in 1 of 3 ways. That’s the case even if the landlord’s buy-to-let mortgage payments have increased and the tenant’s rent is no longer covering the landlord’s mortgage, insurance, and repair costs.
The 3 ways to increase the rent during a fixed-term tenancy are:
- By agreement with the tenant
- Through the use of a rent review clause in the existing tenancy agreement – although most assured shorthold tenancy agreements don’t contain a rent review clause unless the agreement is for more than 12 months
- Ending the fixed term early and the tenant agrees to sign a new assured shorthold tenancy – the tenant may want to do this to get a longer fixed term contract if rental property is in short supply in the area. The landlord benefits from a rent increase and both parties can agree on an appropriate rent review clause in the new tenancy agreement
If a landlord contacts a tenant about a rent increase it is important that the tone of any communications is appropriate to avoid a tenant alleging harassment or intimidation. It is best to keep a record of any text or email messages and notifications about any planned rent rise.
If communications over a rent rise occur there is no requirement to send a formal notice unless a landlord is using section 13 procedure. If the tenant starts paying increased rent, they are deemed to have accepted the rent increase even if they did not communicate acceptance to the landlord.
Tenancy agreements with a rent review clause
If a tenancy agreement contains a rent review clause it is important to check out the wording of the clause before contacting the tenant about the rent increase. For example, a tenancy agreement may say that the rent will go up in line with the retail price index. Alternatively, the agreement may say the landlord can give a month’s notice of a proposed rent increase.
If the assured shorthold tenancy has ended and the tenant is still at the property after the end of the fixed-term agreement the rent review clause will not usually apply. However, the clause will still apply if the tenancy agreement said that the tenancy would continue as a contractual periodic tenancy after the end of the fixed-term agreement.
Asking a tenant to sign a new agreement
If a landlord asks a tenant to sign a new agreement mid-way through their assured shorthold tenancy, then the tenant can't be forced to sign if they don’t want to do so. A landlord may need to give a tenant an incentive to sign a new agreement. For example: offering a longer tenancy agreement or including a provision that the tenant is no longer responsible for garden maintenance or saying that the next rent review clause will not come into force for at least 12 months or offering a rent review provision that limits the future rent increases to in line with the retail prices index.
If a tenant won't agree to a rent rise or a new replacement assured shorthold tenancy
If the tenant is in occupation on a fixed term assured shorthold tenancy and will not agree to a rent increase then there is nothing that a landlord can do until the tenancy is at an end. If at the end of the tenancy agreement, the tenant refuses to leave and refuses to pay an increased rent the landlord can't force the tenant out unless they take possession proceedings.
If a landlord doesn’t mind a tenant staying after the end of their fixed term assured shorthold tenancy, the landlord can serve a section 13 notice rather than an eviction notice and then start possession proceedings. A section 13 notice can be served during the fixed term but the rent increase will only be payable at the end of the fixed-term tenancy agreement.
Rent increases in rolling or periodic tenancies
If a tenant stays on after the end of a fixed-term contract, they may have a periodic tenancy depending on the wording of the original tenancy agreement. Alternatively, the tenancy agreement may have been periodic or rolling from the outset.
If there is a rolling tenancy agreement the rent can be increased if there is a rent review clause. If there isn’t a review clause then the rent can either be increased with the agreement of the tenant or if a landlord serves a section 13 notice.
Rent increases and section 13 notices
A section 13 notice is official so needs to be on the correct form and the right procedure used. A section 13 notice can't be served if:
- The tenancy agreement has an active rent review clause in it
- The tenancy agreement is in its first year
- A section 13 notice has already been served within 12 months
The notice needs to give at least one month’s notice of the planned rent rise and state the new rent start date. If the tenancy is yearly then 6 months’ notice is needed. The rent increase needs to come in on the first day of a period in the tenancy agreement.
A tenant can challenge a section 13 notice of rent increase. Application is made to a tribunal and the rent remains at the old level until the tribunal’s decision. The application must be made before the rent increase comes into force.
The tribunal decides on the rent and has the power to order rent at a higher figure than the landlord suggested. This might happen if the landlord’s section 13 notice still kept the rent below the market rate for the type of property. The tribunal’s decision will be based on other available local properties and the state of the property. The rent increase could be backdated to the date on the section 13 notice.
Section 21 notice
If a landlord and tenant can't agree on a rent rise the landlord may feel forced into serving a section 21 notice to gain repossession and get a new tenant.
How can our landlord and tenant solicitors help you?
At OTS Solicitors our landlord and tenant lawyers can help you with:
- Tenancy agreement advice so you negotiate a tenancy agreement with rent review provisions that meet your needs
- Advice on fixed-term and rolling tenancies
- Section 13 notice advice
- Section 21 notices and possession proceedings
For advice on any aspect of landlord and tenant law our team of specialist solicitors can help with the practical guidance you need.
Online and London Landlord and Tenant Solicitors
For landlord and tenant legal advice call the experts at OTS Solicitors on 0203 959 9123 or complete our online enquiry form.
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