August 28, 2023
How Much can a Landlord Increase Rent?
If you are a private landlord, you may find yourself in a situation where you need to increase your tenants’ rent. Whether it’s due to rising maintenance costs and overheads, you need to cover refurbishment expenses, or you’ve upgraded your property so it now commands a higher rent, you’ll probably be wondering, by how much can a landlord increase rent, and what are the regulations that need to be followed?
In this post we will set out the rules governing rental increases in the private sector, as well as explaining all the associated regulations.
By how much can a landlord increase rent?
Unless the tenancy agreement says otherwise, there is no set maximum amount or percentage that a landlord can increase the rent by due to there being no rent controls in England.
However, if the rent is more than the “market rent” for a property in a similar condition in the same area, the tenant can challenge it in a rent tribunal. And if the property is classed as social housing, then there is a cap of 7% for any rent rise applied in 2023-2024.
The trouble is, if a tenant cannot afford the rent rise, then they will be likely to leave and find an alternative property that they can afford. This could potentially leave you with a void period where no rent is coming in, whilst you source, reference and check-in a new tenant.
Landlords should act responsibly wherever possible. Increasing the rent by a huge amount all of a sudden is not considered reasonable. Just because the law permits it, doesn’t make it right.
A more reasonable approach is to increase the rent by up to the current rate of wage inflation. This is likely to be more of an affordable increase, and less likely to push tenants into arrears. Of course, the rent needs to account for any rising costs incurred by the landlord, but balancing this with the costs of replacing tenants who leave due to being disgruntled with a rent rise should also be taken into consideration.
How often can a landlord increase rent?
How often you can increase rent depends on the type of tenancy, whether there is a rent review clause in the tenancy agreement, and whether the tenants agree to the proposed increase.
Once the Renters Reform Bill comes into effect, private landlords will only be permitted to increase rent once per year, and will need to use a Section 13 Notice. However, as the law currently stands, the frequency of rent rises in England should be as follows:
Under a rent review clause:
If there is a rent review clause in the tenancy agreement, then the landlord must follow that clause. This will usually involve an annual rent review.
Under a periodic tenancy:
Landlords will usually increase the rent only once per year under a periodic tenancy. However, if the tenants agree, there is nothing to stop them making a rise more than once per year.
Sometimes, landlords and tenants agree between themselves to have two increases per year as a way of phasing in a rent rise gradually.
Under a fixed-term tenancy:
Landlords are not permitted to increase the rent during a fixed term tenancy, unless the tenants agree to change the tenancy agreement.
If the tenants do not agree, then the increase will need to be put off until the end of the fixed term, when it can be negotiated as part of the renewal, or when the tenancy switches to a periodic tenancy.
If the renewal fixed term periods are for six months, then it is possible to increase the rent twice within the year, meaning that a 12-month fixed term tenancy can be ‘renewed’ by a 6-month fixed term.
By using a Section 13 notice:
If the landlord and tenant cannot come to an agreement, the landlord will need to use a Section 13 notice to increase the rent. This can only be used once every 12 months.
Section 13 of the Housing Act 1988 permits a landlord to increase the rent on a periodic or assured shorthold tenancy by giving the tenant a notice of increase in line with the set rules.
The Section 13 notice sets the new rent, unless it’s successfully appealed by the tenant at a rent tribunal.
Where the rent is paid monthly, the landlord must give the tenant a month’s notice under Section 13, then commence the new rent at the beginning of a rental period. The notice will only be valid if the date on it matches the date on which the periodic tenancy begins.
Once the Renters Reform Bill comes into effect, landlords will have to use a Section 13 Notice to make increases to rent.
If the tenant doesn’t agree to the rent proposed in the Section 13 notice, they have the right to challenge it via the Rent Tribunal. This must be done before the date the rent increase is due to come into effect.
The Rent Tribunal will assess the rental rate that the property would reasonably achieve if it were let on the open market under a new tenancy on matching terms. They will also take into account any repairs that the landlord should have undertaken, as well as any improvements made by the tenant.
The tenant will need to keep paying the rent at the existing rate until the Rent Tribunal issues its decision. If the proposed rent increase doesn’t exceed the average for a similar property in the area, then there is little likelihood of it being decreased by the Tribunal.
How can landlords avoid rent increase issues?
If you would rather not deal with the issue of rent increases and the potential for tenants getting into arrears, or void periods eating into your bottom line, it may be an idea to consider a guaranteed rent scheme.
With a guaranteed rent scheme, you are paid an agreed rental rate for a set period of time. This rate will remain in place, regardless of whether or not the tenants are paying their rent, and even if the tenants leave. That way, you won’t have to worry about by how much can a landlord increase rent, as everything will be dealt with on your behalf.
Included in the scheme is full property management, as well as tenant sourcing and referencing, day to day tenant liaison and everyday repairs and maintenance.
The City Borough Housing guaranteed rent scheme includes all of this, as well as quarterly property inspections, and a promise that your property will be returned to you at the end of the agreement in its pre-let condition, allowing for fair wear and tear.
To learn more about how a guaranteed rent scheme could benefit you as a landlord, and to request your free rental valuation to discover how much you could achieve for your property each month, please get in touch with our helpful team.