Landlord legals: How to increase rent during a tenancy

Can a landlord increase rent during a tenancy?

Raising rents is something we recommend landlords consider every year. That should ensure your tenant is always paying a fair market rate and your rental income should keep up with the ongoing rise in the cost of living.

If we are fully managing your property, you don’t need to worry about this aspect of letting as we will contact you and advise on local market rents. We will also carry out any rent increase process in accordance with the law.

But we know some landlords struggle with increasing rent for an existing tenant, especially if the tenant has always paid their rent on time and is looking after the property well. Sometimes they don’t want to risk the tenant looking for somewhere cheaper to live, and sometimes they feel it’s a way of thanking the tenant for taking such good care of their home.  

At the other end of the spectrum, if landlords’ costs are increasing – as is the case for many at the moment with mortgage payments – many feel they should be able to pass this on to the tenant. So, when can you increase the rent and is there a limit?

Key things to know about raising rents

• Rent can only be increased:

• By agreement, or
• If the tenancy is within a fixed term, by a rent review clause (which must comply with the Unfair Terms rules), or
• If the tenancy is periodic, by the section 13 notice procedure (form 4 on the government website)

Importantly, you cannot simply send the tenant a letter telling them that the rent is going up! This will be unenforceable and your tenants can just ignore it.

Essentially, rents have to be affordable for tenants, so you’re likely to be restricted by the local market. If your tenant challenges a rent increase under section 13 and the First Tier Tribunal decides it is not fair and realistic – i.e. not in line with average local rents – they will set a new rent at what they consider is the proper market rate for the property.

Although rents have been increasing well over the past couple of years, the reality is that you’re highly unlikely to be able to pass on all of your extra costs right now. So you may have to simply accept a drop in rental profits, at least in the short term.

What’s the process for raising rent?

There are three ways to raise your tenant’s rent:

1. You can agree a rent increase at any point with your tenant – even during a fixed term. Ideally, the tenant should be getting some benefit – e.g. the right to keep a pet - otherwise the increase may not be enforceable under general contract rules. Any agreement should be put in writing and signed by both parties.
    
2. At the end of a fixed term, you can renew a tenancy with an increased rent, either by using a renewal form or by getting the tenant to sign a new tenancy agreement. If the tenant refuses to sign, the new rent will not take effect.
    
3. If a tenancy is periodical, you can use a section 13 ‘landlord’s notice proposing a new rent’ form (Form 4). You can also issue this during a fixed term, with the increase taking effect once the fixed term has ended. There are specific rules for using this process – for example, you must give one month’s notice, the tenants can challenge the proposed increase via the First Tier Tribunal if they feel it is unfair, and the process can only be used once every 12 months.

How much can a landlord increase a tenant's rent?

We’d recommend you review your rental income every year, for two reasons:

1. If you don’t increase your tenant’s rent at least in line with inflation, you’ll end up losing money. As the cost of goods and services goes up, you’ll make less profit, and that profit won’t buy you as much in the marketplace.
    
2. Small, manageable increases are far better for tenants than big jumps every few years. If you keep their rent the same year after year, when they eventually decide to move on, they could get quite a shock at how much average prices have gone up. They may even find they can’t afford a comparable home because they simply hadn’t been used to budgeting for that level of rent.

So, annual reviews are not only necessary to protect your own rental profits, but they’re a sensible and realistic way to proceed for your tenant.

If we currently manage your property, there’s no need to worry about any of this, as we will handle any rent increases on your behalf. But if you have any questions or currently self-manage and would like to talk to us about our services, just get in touch with your local Your Move branch and have a chat with one of the team.

Additionally, market prices are continually changing. Now is the time to find out exactly how much your property is worth. 

Find your local Your Move branch today