As most Assured Shorthold Tenancies (AST) are by definition, short, there is usually no need for landlords to get involved in processing a rent increase.
However, some ASTs run for long periods after the fixed term has ended, i.e., when the tenancy becomes a statutory periodic tenancy, hence there is sometimes the need to affect a rent increase mid tenancy, though there are other ways to accomplish this.
With all ASTs landlords can only increase the rent after the initial fixed term has ended, unless:
1. A rent increase or formulae for increase has been agreed beforehand and stated in the agreement
2. The tenancy agreement contains a rent review clause.
3. The landlord and tenant come to a mutually agreed rent increase.
Most standard AST agreements have a rent increase clause setting out the procedure for rent increases, which by definition is then agreed at the start of the tenancy.
If however the tenancy agreement is silent on the matter of rent increases and the tenant objects to an increase, then, if the landlord wishes to pursue the matter, he has recourse to a procedure laid down in the Housing Act 1988.
This procedure was intended for tenants on an Assured Tenancy (AT) but it can also be used for ASTs.
Assured Tenancies (ATs) give tenants security of tenure, meaning landlords cannot use the s21 eviction process and must therefore have a means of increasing the rent for tenancies which last for a long time. Section 13(2) of the Housing Act 1988 makes this possible, after the initial fixed term has ended, by serving on the tenant a Section 13 Notice.
The landlord of an AST has another option; rather than going through a protracted rent increase process using s13(2), of offering the tenant a new fixed term tenancy at an increased rent, failing which the landlord can give the tenant notice that he will be applying for a possession order.
If a landlord does not follow the correct procedure and conditions laid down by s13(2) and give the tenant the correct notice of a proposed increase to a market rent, then the tenant can continue paying the original rent amount.
However, with a tenant on an AST, as opposed to an AT, the tenant is in a weak position, as the landlord may simply serve an s21 notice and start eviction proceedings.
Sufficient notice of rent increase required
The landlord is required to give tenants sufficient notice before a rent increase can take effect. In the case of monthly, weekly or fortnightly tenancies, under s13(2) of the Act, one month’s notice of the intended increase is required. Longer tenancies, for example three months, require one rent period’s notice.
Furthermore, at least one year must have elapsed since any previous increase using a section 13 notice. Another proviso is that the increase must start on the same day of the month as the existing rent due date – if rent is paid on the 1st of each month, the new increased payment is due on the same day each month.
Section 13 Notice
Then Housing Act 1988 section 13(2), as amended by the Regulatory Reform (Assured Periodic Tenancies) (Rent Increases) Order 2003, is a Landlord’s Notice proposing a new rent under an Assured Periodic Tenancy of premises situated in England. The notes attached give guidance to both landlords and tenants about this notice. See the download link below.
Section 13(2) the Housing Act 1988 states that the landlord with a tenant on a periodic AST must issue the tenant with a Section 13 Notice if the increase in rent is not stated in the tenancy agreement and where the tenant refuses to agree to a proposed increase in rent.
The Section 13 Notice must provide the following:
– Details of the Landlord and/or his Agent
– Details of the Tenant
– Details of the Property
– The amount of the proposed increase in rent
– The proposed commencement date
The landlord must serve the section 13 notice on the tenant, giving the tenant the correct amount of notice.
A definitive (FORM No. 4B) section 13 notice has been provided by the Department of Communities and Local Government (DCLG) which can be completed by the landlord and served on the tenant.
Form 4B contains information on the rent increase, the starting date for the new rent proposed, and detailed guidance notes for both the landlord and the tenant.
If a landlord makes a request to increase the rent but fails to serve a section 13 notice, then the tenant is not obliged to pay the increased rent unless stated in the tenancy agreement.
As has been stated above, Section 13 is more relevant to Assured Tenancies (ATs) where tenants have long-term security of tenure. With ASTs if is often easier for the landlord to issue a new tenancy at a higher rent, unless there is a good reason why the landlord wants to keep the tenant on a periodic tenancy.
Residential Property Tribunal – Rent Assessment Committee
With ATs and ASTs landlords are entitled to charge a full market rent. Market rents are determined by reference to the availability of properties and rents being charged for similar properties in the area. This is what a Rent Assessment Committee will do to determine the correct rent for a property.
Most tenants of private landlords are Assured Shorthold Tenants (ASTs), this being the default residential tenancy, and they are entitled, on receiving notice of a rent increase, to ask a first-tier property tribunal (Rent Assessment Committee) to decide and to fix a market rent.
However, tribunals can decide that a proposed increase is actually below the market rent and may increase the rent rather than reduce it.
Tenants are also entitled to apply to a first-tier property tribunal for the rent to be adjusted if they feel their initial rent is excessive. This applies only during the first six months of a tenant’s first AST. After that initial period the tenant cannot apply even if they later renew the tenancy.
Tenants must apply for a review within that first month of receiving the notice. A test case confirms that if the application for review is received even one day late, it will be too late. Once the month has passed the new rent in the notice becomes is confirmed.
Under the legislation as it currently stands Assured Shorthold Tenants (ASTs) have very little protection from eviction after their initial fixed term. Tenants can be evicted after the initial fixed period without a legal reason, providing the landlord gives them two months’ notice before applying to the courts for a possession order under s21 of the Housing Act 1988.
However, the whole process can take many months and few landlords evict tenants without good reason, the main reason for eviction being rent arrears.
Although landlords are in a strong position to impose rent increases to market levels by threatening eviction if necessary, most are willing to accept a lower rent over long periods if they know they have a good tenant paying rent on time and looking after the property.
A landlord is likely to lose far more by going through a protracted eviction and re-letting process, with the possibility of a long void period, than if he allows the tenant to stay on a slightly below market rent. This approach has the advantage of retaining good tenant relations and a long-term tenancy.
By far the easiest way to make a rent increase, in those rare situations where an AST has lasted for many years, is to reach a mutual agreement between landlord and tenant to either renew the tenancy on a higher rent, or agree a new rent and create a “Rent Increase Agreement” which should be put in writing.
Rent Increases – www.gov.uk/renting-out-a-property/rent-increases
Disputes about Rent – www.gov.uk/housing-tribunals/disputes-about-rent
Property Tribunals – www.justice.gov.uk/tribunals/residential-property
The Rent Assessment Committee: http://goo.gl/qZkBiA
Market Rents under assured and assured shorthold tenancies under the Housing Act 1988 – Guidance on Procedure: http://goo.gl/hPsYZN
By Tom Entwistle, LandlordZONE®
If you have any questions about any of the issues here, post your question to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.
©LandlordZONE All Rights Reserved – never rely totally on these general guidelines which apply primarily to England and Wales. They are not definitive statements of the law. Before taking action or not, always do your own research and/or seek professional advice with the full facts of your case and all documents to hand.