How to increase tenants’ rent: a landlord’s guide
July 12, 2024
Increasing your Tenants’ rent is a big decision that shouldn’t be taken lightly, and it’s natural for both Landlords and Tenants to feel worried or unsure about it. In this article, we’ll show how to navigate the process with confidence while keeping a positive relationship with your Tenants.
Understanding the importance of rent increases
Before we get into the “how-to” of rent increases, it’s important to briefly touch on the “why.”
As Landlords face rising interest rates and maintenance costs, making rent adjustments is often needed to keep your investment sustainable and in-line with the market rate.
However, Landlords need to strike a balance to cover costs while keeping their Tenants on-side and satisfied.
Finding a fair rent increase percentage
It’s important to work out a fair and reasonable percentage increase. Charging too much risks losing your Tenants (which will leave you out of pocket), while charging too little can lead to your own financial strain.
A fair rent increase in the UK is generally 3-5%, which is in-line with market trends and inflation rates.
But first make sure you compare your rate to similar properties in the area, while keeping in mind the market conditions, your Tenants’ affordability and what condition the property’s in.
When can a landlord increase rent?
It’s essential to understand the timing of rent increases.
For periodic tenancies (i.e. rolling week-by-week or month-by-month), Landlords can typically increase rent once a year.
For fixed-term tenancies, where a set period has been set, rent increases can only happen with the Tenant’s agreement, unless a rent review clause is included in the tenancy agreement.
Adding a Rent Review Clause to the Tenancy Agreement
To give as much clarity as possible, consider having a rent review clause written into your tenancy agreements.
This clause highlights when the increase will happen, the notice period for the Tenant, and the rates used to calculate the rent adjustment. A well-defined rent review clause ensures both Landlord and Tenant understand the process clearly – which can help avoid disagreements in future.
Proposing the rent increase
Once you’ve determined the fair rent increase percentage and considered the timing, it’s time to propose the increase to your Tenant.
You have a few options:
Renew a fixed-term tenancy with an increased rent.
Reach an agreement with the Tenant and get everything in writing.
Use the ‘Landlord’s notice proposing a new rent’ form (a Section 13 notice) after the fixed term has ended. The Section 13 process can only be used once a year, and the notice period varies depending on how long the rental agreement is for.
Communicate openly and negotiate
When asking for a rent increase, it’s important to be both open and transparent.
Listen to your Tenants’ concerns and be open to negotiation if they’re experiencing their own financial difficulties. Finding common ground and showing empathy can always help maintain a positive relationship with your Tenants, particularly during this process.
Dealing with disagreements
If your Tenant refuses the rent increase, you may struggle to reach an agreement or risk an expensive gap in tenancies if they decide to move on.
In these situations, it’s crucial to know your rights as a Landlord and explore options for mediation or appealing to a tenancy tribunal. For a full breakdown of UK laws around rent increases, visit gov.uk.
Rent increases can be a sensitive subject, but with the right approach it can be a fair and necessary step for Landlords. By understanding the importance of fair rent increases, you can get the balance right between maintaining your finances and keeping your Tenants happy, leading to longer and more positive relationships.
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Disclaimer: This article is a guide and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Always speak to a suitably qualified professional if you require specific advice or information.
