How Much Can a Landlord Increase Rent?

As a landlord, there may be times when you would like to increase the rent that you charge your tenants. There is nothing to stop you doing this, but you must follow the correct procedure that is set out by law. Here we delve into the subject of rent increases, asking, is there a limit to how much a UK landlord can raise rent?

When you are looking at making an increase to the rent you charge, the first thing to do is consider the type of tenancy you have set up with your tenant.

For periodic tenancies, rolling on a week-by-week or month-by-month basis, you cannot normally increase the rent more than once a year without your tenants’ agreement. If they do agree to a rent increase, then you should produce a written record of the agreement that you should both sign. You can also use a ‘Landlord’s notice proposing a new rent’ form, giving your tenant at least a month’s notice of the rent increase.

If your tenancy is fixed term, running for a set period, you can only increase the rent if the tenants agree to it. If they do not agree, then you will only be able to increase the rent once the fixed term has come to an end.

What is a rent review clause?

You also have the option to include a rent review cause in the tenancy agreement, allowing you to increase the rent.

The clause should set out when the increase will take place, and the amount of notice that will be given to the tenant. It should also show a formula for calculating the rent increase. Clarity and transparency are crucial if you are going to avoid a rent dispute. Also bear in mind that once you have set out in your tenancy agreement how the rent can be increased, you will not be able to deviate from it.

What if there is no rent review clause, how to increase rent?

If your tenancy agreement does not include a rent review clause, or if it has expired and you still wish to increase the rent, then you can go down the route of issuing a Section 13 notice.

This procedure can only be used once in a year, and the tenant must be given a minimum of one month’s notice of the proposed increase for weekly or monthly rental agreements. If the agreement is for longer than a month, then the tenant will be entitled to more notice, usually six months.

A Section 13 notice can be served during the fixed term of the tenancy. However, the rent increase cannot come into force until after the fixed term has come to an end. If a tenancy did not begin with a fixed term, then a Section 13 notice cannot be used at any point during the first year.

What if the tenants do not agree to the rent increase?

If your tenants think that the rent increase you are proposing is unfair, they can ask the First Tier Property Tribunal to decide the right amount.

How much can a landlord increase rent?

The government says that rent increase you propose must be fair and realistic, that is, in line with reasonable rents on the open market, and relevant to the size of the property. For example, if the majority of two bedroom houses in the area are renting at around £1200 per month, then a landlord cannot expect to set their rent for the same size property at £1600 per month.

If you are proposing to increase the rent by more than any amount previously agreed, then you will need to obtain the tenant’s permission.

A typical rent increase will usually be around 3-5 per cent annually. Rents tend to rise in line with inflation.

According to the HomeLet Rental Index for March 2021, the average rent in the UK is now £922, up by 0.8 per cent from last month, and up 3.4 per cent on 2020. When London is excluded, the average rent in the UK is now £847, up 0.8 per cent on last month and 6.8 per cent on 2020.

Want to offload the burden of rent increases and rent collection?

If you’d rather not concern yourself over the intricacies of rent increases, and would like to enjoy guaranteed rental payments every month, even during void periods, why not consider the homes2let guaranteed rent scheme?

Our scheme provides landlords with complete peace of mind that rent arrears will never become an issue, and you’ll never have to worry about issuing formal notices for rent increases again.

With our scheme, you will enjoy market rate rental fees, whilst not having to pay legal costs or management commission, even though we will fully manage your property, including sourcing tenants and handling repairs and maintenance. And of course, dealing with the legalities of rent increases.

To learn more about how our guaranteed rent scheme could benefit you as a landlord, you are welcome to get in touch with our team of experienced property experts.