Rent increase is an important consideration for landlords. Rent increases help landlords cover rising property-related expenses, mitigate the impact of inflation and capitalize on the market conditions. As a result, increasing rent allows landlords to maximize their rental income and generate a higher return on their investment. In this way, rent increases serve as a strategic tool, fostering financial stability and growth for landlords in the dynamic UK rental market.
In this article, we'll cover everything you need to know about rent increases in the UK. You’ll learn when and how landlords can raise the rent, the factors that determine fair rent increases, and the consequences of unfair rent increases.
How much can a landlord increase the rent in the UK?
There isn’t a specific limit on how much a private landlord can increase the rent. Yet, the increase must be fair and reasonable.
To determine a fair rent increase, you should consider changes in the local rental market, inflation rates, and the condition of the property. It’s also handy to use indices such as the Retail Price Index (RPI) or the Consumer Price Index (CPI) when calculating the percentage increase.
If the tenant thinks the proposed rent increase is excessive, they can refer the matter to a First-tier Tribunal (Property Chamber) for review. Then the tribunal will consider the evidence and evaluate the proposed rent increase.
If the First-tier Tribunal finds a proposed rent increase unfair, they’ll reject it. The tribunal’s decision may also prevent future increases for a specified period
When can a landlord increase rent in the UK?
When and how often you can increase rent in the UK depends on the type of tenancy agreement.
Landlord can increase the rent in the fixed-term tenancy
During a fixed-term tenancy, landlords can increase the rent only if the tenancy agreement includes a rent review clause. This will specify the date when the rent increase can happen.
Otherwise, the rent can only be raised at the end of the fixed-term tenancy agreement or if the tenant agrees.
Landlord can increase the rent in a periodic tenancy
In periodic tenancies, landlords can typically increase rent once a year if there’s a rent review clause. The tenant has to agree.
If a rent review clause is not included, landlords can increase the rent only by negotiating or issuing a legal rent increase notice (Section 13). Section 13 can only be issued once a year, and the new rent will start at the beginning of a new tenancy period.
The rules for using Section 13 depend on the type of periodic tenancy. In a contractual periodic tenancy, landlords can’t use Section 13 during the first year, which includes the initial fixed-term period. But, in a statutory periodic tenancy, landlords may issue a Section 13 notice during the previous fixed-term rental agreement.
How can you increase the rent as a landlord in the UK?
You can increase the rent in 3 different ways: rent review clause, Section 13 notice, or by negotiating with the tenant. In either case, you have to inform the tenant of the rent increase in advance and, preferably, with a written notice.
Increasing the rent by using a rent review clause
When using a rent review clause to increase rent, the terms of the tenancy agreement determine the process.
The rent review clause must at least specify the date and notice period for the rent increase. While it's possible to leave the exact amount or calculation out, it's recommended to include it to prevent disagreements. Having a clearly defined process in the tenancy agreement can also help build trust between the landlord and tenant, which can lead to a positive and respectful relationship throughout the tenancy.
The rent review clause may indicate a specific index, such as the Retail Price Index (RPI), or a percentage increase based on market conditions or other factors.
For example:
“Once a year, the landlord can raise the rent by a minimum of 4% and a maximum of 9%, based on the Retail Price Index. The landlord must provide written notice at least 2 months before the date the rent increase will take effect.”
Increasing the rent by serving Section 13 notice
To use Section 13, you must fill out Form 4 and serve it to the tenant. Otherwise, the rent change won’t be legally valid.
The Form 4 must include the following information:
- The date the notice is served
- The new rent amount
- The date the new rent amount will take effect
- The reason for the rent increase
The notice should also inform the tenant of their right to challenge the increase by referring the matter to a First-tier Tribunal.
Increasing the rent by negotiating in the UK
Tenants and landlords can mutually agree on the rent increase in both fixed-term or periodic tenancies. In this case, the agreement can be written or verbal.
If a tenant verbally agrees to a rent increase but later refuses to pay, an exchange of text messages or emails can be evidence of the agreement. The text must mention the new rent amount to count as written evidence. Also, if your tenant pays the new rent amount, they legally agree to the rent increase.
Without any evidence, you may struggle to prove that the tenant agreed to the new rent. That’s why it’s best to put the agreement in writing.
Rent increase letter to tenants
No matter how you want to raise the rent, you must notify your tenant of a rent increase even if you have a rent review clause in your tenancy agreement. To do that, you should write a letter to your tenant informing them of the rent increase. The letter should include the new rent amount, the date it will take effect, and the reason for the increase, if applicable.
You should send the letter to your tenant via post or email, depending on the method of communication agreed upon in the tenancy agreement.
Notice period for rent increases in the UK
When issuing a notice of rent increase, you have to keep the minimum notice period in mind.
When using the rent review clause, landlords must follow the minimum notice period stated in the clause. While there isn’t a minimum legal notice period, it's commonly between 1 and 3 months.
When using Section 13 notice, the minimum notice period depends on the periodic basis of the tenancy agreement. That period is:
- 1 month for a tenancy which is monthly or for a lesser period (e.g., weekly);
- 6 months for a yearly tenancy;
- in all other cases, a period equal to the length of the tenancy (e.g., 3 months in the case of a 3-month tenancy.)
This article is for informational purposes only. Please consult the appropriate authorities for the latest developments or a lawyer for legal advice.
For feedback on this article or other suggestions, please email content@housinganywhere.com
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