Increasing the rent – how can I increase the rent for my tenant who is on an Assured Shorthold Tenancy? Can I raise the rent and if so, how often?
Usually an assured shorthold tenancy (AST) involves a short letting so rent increases don’t come into it.
If you have a 6 month or 12 month tenancy and your tenant wishes to renew, you can issue a new tenancy on a higher rent. Your tenant then has a choice: accept the new tenancy on the higher rent or leave and find somewhere else.
You can raise the rent but this depends what your tenancy agreement says. Arrangements made for paying and reviewing the rent should be included in your tenancy agreement.
For a fixed-term tenancy the agreement should say it will be fixed for the length of the term or that it will be reviewed, how it will be reviewed and at what intervals.
If your AST is a contractual periodic tenancy from day one, again the agreement should say when and how it will be reviewed.
Increasing the rent can sometimes trigger a move, so if you have good tenants and you don’t want them to leave, think carefully before you ask for more rent. It’s often wise to take a little less in rent than have a long void period with no rent coming in at all.
However, some landlords don’t renew their fixed-term tenancies – they allow them to run-on after the fixed-term into a statutory periodic tenancy – month to month if the rent is paid monthly. This can go on indefinitely if the tenant stays.
In this situation the rent can fall well behind the market rent, so at some point you will want to increase it.
Where the tenancy agreement is silent on rent reviews Section 13(2) of the Housing Act 1988 makes provision for rent increases in perodic ASTs. There is a prescribed form for this purpose and specific rules which must be followed.
You can issue this notice if you want to increase the rent but you should bear in mind:
If you charge more than a Market Rent your tenant can appeal to the Rent Assessment Committee for a determination of rent, which may be a lower amount than you are asking. They will fix a new rent which will be enfoced for 12 months.
Secondly, if your tenant is claiming Housing Benefit you should be aware of the amount payable under the Local Housing Allowance when fixing your new rent. This may affect the amount your tenant claims and pays.
The rules for the Tenancy Deposit Scheme (Housing Act 2004) mean that any tenancy commencing after 6th April 2007 will require the deposit to be protected in the scheme. If you are holding a deposit it must be lodged with the scheme.
Therefore, landlords with tenancies prior to this day may wish not to create a new tenancy, but to increase the rent instead.
What is the difference between a fixed-term, a statutory periodic and a contractual periodic tenancy?
A fixed-term tenancy is created for a specified length of time – 6 or 12 months for example. Both parties are committed to this period – the tenant must pay rent for the full term and the landlord cannot regain possession during this fixed-term. With an AST the tenant has a minimum tenancy term of 6 months in any case, but the contracted period could be shorter.
When tenants stay on after the end of the fixed-term the tenancy will automatically (the landlord does not need to do anything) become a statutory periodic tenancy – at tenancy protected by the statutory rules of the Housing Acts 1988 and 1996, running in periods based on the rent payment periods – month to month for a monthly tenancy.
In the case of a contractual periodic tenancy, this is where the AST is periodic from day one – it is contracted and agreed that way.
With a perodic tenancy the landlord does not have the security of a longer term let.
The tenant can leave with just one full period’s notice in writing – the notice to quit must be a full tenancy period ending on the last day of a tenancy period.
In the case of weekly periods (rent paid weekly) the notice period is 28 days.
©LandlordZONE All Rights Reserved – never rely totally on these standard answers which apply primarily to England & Wales. Before taking action or not, always do your own research and/or seek professional advice with the full facts of the case and all documents to hand.