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Negotiating a rent increase

Journalist: Emma Lunn, Freelance

ended 21. September 2022

Hi. I'm writing a feature for Property Hub - a magazine for landlords and property investors. It's about how to put rents up without alienating your tenants.

I need letting agents/mortgage experts/landlords/property experts to provide brief comments on:

How to justify a rent increase for tenants (i.e. mortgage rates going up etc)?

Legally, how often can a landlord increase the rent and by how much?

How to calculate a fair rent increase?

How to correctly issue a section 13 notice?

The pros and cons of putting up the rent - i.e. is it worth keeping the rent the same to hold on to good tenants?

4 responses from the Newspage community

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Editor
Rob Peters
Principal at Simple Fast Mortgage
Whether to increase tenants rent, or not is entirely at the landlords discretion. Unless of course the property is in Scotland, where a freeze on rent has been imposed by the SNP. At the end of the day landlords are running a business and need to ensure that business is profitable. If the cost of running any business goes up, then it stands to reason those costs have to be recouped through the sale of the goods or services the company provides, or cease trading. Landlords are no different. Tenants are not exclusively affected by the cost of living crisis. Landlords also have to eat, put fuel in their vehicle, and heat their homes. Vilifying landlords has to stop. Many landlords have already absorbed increased costs faced through the widely publicised legislative changes imposed over recent years. Expecting them to now absorb the effects of a recession and a new era of ineterst rates is ludicrous.
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Imran Hussain
Director at Harmony Financial Services
Interest rate rises are simply part and parcel of mortgages, and any landlord who thinks the cost can simply be punted to the tenant is in for a shock whilst rents have risen sharply in the past 24 months good landlords with good long-term tenants have either held rents or increase the rents by an average of £20 to £50 per calendar month and I am seeing more tenants look beyond their ideal locations if the rent Increase is too high as with remote working becoming more common this trend will continue if rents become unmanageable for some.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Even someone renting a property is going to know that the Bank of England has increased the base rate significantly over the last few months, meaning they are probably expecting an increase in their own rents, so it's unlikely to come as a shock when you bring the subject up. A clear explanation of how much the mortgage cost has increased for you and a sensible increase is unlikely to cause too much friction - but given the overall cost-of-living crisis it is going to be expected that the you and your tenant share the pain, so to speak, so the increase needs to leave some of the cost with you and not simply shift 100% of the rise to them. If you have a great tenant then give that a financial benefit in your calculations, there is a real-world value to someone who pays on time and looks after your property, so it's worth making a smaller rent increase to keep them if you can.
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Dorian Payne
Managing Director at Castell Group
Putting up your a tenants rent can be a difficult dilemma, especially if they are a long-term tenant that doesn't prove to be a hassle. The best way we've increased our rents is by firstly asking ourselves, do we really need to? We look at the property and it's condition versus the market to establish what the going market rent is. We can then easily calculate the difference. We then like to understand the tenants position in more detail and if they're vulnerable or struggling, we will ask ourselves if this is something we can live with. If not, or something material has occurred, such as, our mortgage rates have increased and we are looking to increase the rent so our net effect is nil. Hopefully this still means the rent required is technically lower than the market value, assuming you receive the same rate. It then all begins with having an open conversation with the tenant and letting them know what has happened, what the open market rent is and what you're intending to increase it to. There may be some back and forth, but should the new figure be amicably agreed, either a new signed tenancy agreement can be completed, or a formal Section 13 notice can be issued, once the tenant has paid the rent it is implied the new rent amount is accepted. If the tenant doesn't agree and you wish to proceed, a formal section 13 notice can be issued, assuming the tenancy has lapsed it's fixed term and is now rolling on periodically. Sufficient notice must be served which is a minimum of one month. The tenant has the right to appeal to the First-tier Tribunal Property Chamber (Residential Property) and must do so before the rent becomes due again. However, it's important to note that the tribunal will undertake comparable evidence as mentioned above, so if you are trying to increase the rents higher than what can be fairly proven using known comparables, landlords may struggle.