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A simple guide to approaching rent increases

If you haven't revisited your tenant's rent lately, it might be time to consider doing so. While some landlords choose to keep the rent unchanged for existing tenants over the years, this approach can lead to issues for both parties involved.

From the tenant's perspective, sticking with the same rent for an extended period might seem convenient initially. However, when they eventually seek a new rental, they could be in for a surprise to find that rents have significantly risen compared to what they've been paying.

On the flip side, from the landlord's viewpoint, not adjusting the rent means potentially missing out on funds that could have been allocated to mortgage payments, essential property maintenance, or investments such as energy-efficient upgrades.

A more beneficial approach for all parties involved would involve modest annual increases aligned with inflation. For instance, a 2.5% yearly increase would translate to a £25 raise in monthly rent.

Three ways to increase rent

If a letting agent manages your property, they typically handle rent increase recommendations and the entire process. However, if you're a self-managing landlord, it's crucial to adhere to letting regulations when considering rent hikes. There are three legal methods to increase rent:

1.            By Agreement: Rent increases are often agreed upon with tenants signing a new tenancy agreement at renewal, minimising potential disputes. It's essential to have proof of agreement, ideally in the form of a signed document or letter.

2.            Through Rent Review Clauses: Some tenancy agreements include rent review clauses, allowing for rent adjustments during the fixed term. These clauses must be fair and typically involve an agreed percentage rise or linkage to an outside index such as the CPHI Index.

3.            Via the Statutory Notice Procedure: This formal procedure provides a framework fo rincreasing rent during periodic tenancies. Landlords must use the prescribed form, giving tenants one month's notice of the proposed new rent. If the tenant disagrees with the proposed rent, they can refer it to the First Tier Tribunal for review.

Approaching rent increases fairly

To implement rent increases fairly, consider the following guidelines:

1.            Consider Tenant Circumstances: While aligning rent hikes with inflation is ideal, it may not always be feasible. Take into account your tenant's financial situation and wage increases, as raising rent beyond their means could lead to tenant turnover.

2.            Assess Local Rental Rates: Regularly assess local rental rates to ensure competitiveness and fairness. Rents could be dropping for whatever reason, in which case you’re best to leave the current rent as is. If rents are rising rapidly, consider the tenant's individual circumstances and adjust the rent accordingly.

3.            Improve the Property: Consider improving the property or offering incentives to tenants to justify the increase. This could include upgrading appliances or refreshing the décor – it’s all about maintaining a positive landlord-tenant relationship.

Uncertain about what you’re charging as rent?

According to Zoopla, UK rents rose +9.7% in the last year(December 2023) so if you haven’t looked at increasing rent recently, you may want to prioritise this.

If you're unsure whether you're charging a fair market rent, consider seeking advice from professionals. We’d be more than happy to offer some guidance, you can find your local Leaders branch on our website.


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