How to increase rent the right way
As a landlord, it is important to understand how to increase rent in a fair and reasonable manner.
While maximising return on investment may be appealing, you should assess the impact on your tenants and ensure that any rent increases are justified. This guide will help you increase rent the right way while maintaining a positive relationship with tenants.
What are the rules surrounding rent increases?
Although landlords are generally allowed to increase rent, there are rules and regulations that must be followed. Rents cannot be raised during a fixed-term tenancy unless there is a clause in the agreement that states a pre-agreed increase. Rents can be raised once a year in a periodic tenancy, as long as the tenant is provided with sufficient notice.
How can landlords increase rent?
Here are the four most common ways landlords can raise rent:
Signing a new tenancy agreement
The most common way of increasing rent is by signing a new tenancy agreement with altered rates. This is the most straightforward way of increasing rent because there are fewer regulations to follow, and landlords are free to adjust prices to reflect market value and cover additional costs.
Activating the fixed-term increase
If a fixed-term agreement contains a clause allowing the landlord to increase rent at a certain point during the tenancy, a written notice must be issued stating when the increase will take effect. The notice period should ideally be at least two months, and both parties must sign a rent increase agreement.
Reaching a mutual agreement
Landlords can contact tenants to discuss potential rent increases. When taking this approach, it is crucial to be honest about the reasons for proposing a rent increase while also considering the impact on the tenant. If a deal is reached, a rent increase agreement must be signed to make it official.
Serving a Section 13 notice
If a landlord cannot reach an agreement with a tenant, they may choose to serve a Section 13 notice. This is a more formal method of increasing rent and can only be served in a short-term periodic tenancy. The landlord must fill out ‘form 4’ and serve it to the tenant, who may then accept or challenge the rent increase. If a tenant challenges a rent increase, it will be referred to the first-tier tribunal, which will consider the arguments presented by both parties before deciding whether or not the rent increase is fair.
How much can landlords increase rent by?
There is no specific limit on how much landlords can raise rent. However, the government stipulates that any increases must be fair and realistic based on the local market. A rental charge that significantly exceeds the local average rent of similar properties would not be seen as fair or realistic.
How can an estate agent help?
Estate agents play an important role in assisting landlords with increasing rent in a fair and reasonable manner. They research the rental market on behalf of landlords and recommend an appropriate rate to charge, as well as assisting in negotiating with tenants to achieve the best results for both parties while maintaining a positive relationship.
Final thoughts
To ensure a stress-free and profitable tenancy, landlords must strike a balance between increasing rental income and maintaining positive relationships with tenants. After all, losing a reliable tenant because of an unreasonable rent increase could cost you more money than it’s worth. Rules and regulations differ depending on the type of tenancy and the method of proposing a rent increase, so it is important to keep up to date with the latest legislation with the help of a trustworthy estate agent.
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This article was originally published by BriefYourMarket and is reproduced here with their permission.
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