Increasing the rent
Increasing the rent is becoming a pleasant and regular occurence for many landlords.
We like the Rentindex (but we would) for the fact that it only uses Assured Shorthold Tenancies (AST) and that it uniquely uses a live feed of daily tenancies from 6,000 landlords over a 90 day period to produce it’s figures. The latest statistics show that rents are up 3% over the year at £611.
Time to increase the rent?
I’ve been thinking for some time that some of my rents are falling behind the market. Most of my tenants are longstanding. Many of them have been renting from me for over 5 years. During this time I’ve taken the approach that I rather cultivate a long-term relationship with my tenants (thus hopefully avoiding a void period whilst re-letting) rather than going for an upper quartile rent. I’ve therefore being slightly lax in increasing rents in line with rising rental levels and inflation. It is possible to have a tenancy agreement with an automatic esculator clause where rents rise automatically say every 6 or 12 months. This is very uncommon. It’s tended to be seen as overly onerous by tenants. Most landlords opt for a fixed rent during the fixed term tenancy. They then increase the rent at the end of the fix term. How should I increase my rents?
Increasing the rent ( FIXED TERM )
How you go about increasing your rent will depend on the type of tenancy you have. If the tenancy is a fixed term tenancy and it is still in term then the easiest option for a landlord is to wait for the tenancy period to come to an end and then grant a new tenancy at the higher rent.
Increasing the rent ( STATUTORY PERIODIC TENANCY )
Where it becomes slightly more problematic is where the fixed term has come to an end and the tenancy has becomes a statutory periodic tenancy running from period to period.
Where your tenancies are a statutory periodic tenancy as is the case of most of my long standing tenancies; landlords will need to go through the formal procedure as set out in section 13 of the Housing Act 1988 to increase the rent. In this case landlords will need to download the special form titled “Landlord’s notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy” sometimes known as a section 13 notice. These Section 13 Notices availiable as one of our free landlord forms can be downloaded FREE through Property Hawk’s free property management software.
This form allows a landlord to propose a rent increase as soon as the statutory periodic tenancy begins. For a contractual period tenancy a landlord can use the same form to propose an increase that will take effect one year after a tenancy begins. In both cases a months notice of the increase is required for rents paid on a weekly or monthly basis (more if the rent period is longer). With both periodic tenancies a landlord can propose further rent increases at yearly intervals, after the first increase.
Remember in all cases a landlord and tenant can increase the rent at any stage of the tenancy as long as both parties agree. So what will I do?
Now I have genned up on the law. The next step is to do some detailed market research to find out what the going rate is for rents around my rental properties to make sure I pitch my revised rents at a realistic level. I’ll probably use Rightmove and Zoopla as two of the biggest property portals to get an up to date idea of the rents. Then, armed with this information I’ll broach the subject with the tenants ‘gently’ overt the phone to gauge their reactions. The reality is that landlords have also to be aware that in the current economic climate even a small increase can sometimes tip the balance between affordability and inaction by the tenant to make them actively look for a new property to rent. I’m thinking a 5% increase across the board is reasonable.
What are other landlords doing? Post your view below.