Increasing Rent: How Can Landlords Increase Rental Payments?
- November 16, 2022
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Landlords are increasing rent over time to keep up with inflation, the rising cost of living and higher interest rates. However, if you want to increase your tenant’s rent, there are some best practices you may want to consider. Flex Living’s property management experts keep up-to-date with the rental property market and deal with rent-based issues every day. So, we’ve compiled this brief guide to answer common questions like what is a fair rent increase in the UK, and how often can a landlord increase rent?
In this article, we are going to discuss :
Scenarios Where Landlords Can Increase Rent
Generally, the first step to seeing how you can increase your tenant’s rent is to check what type of tenancy agreement you have and then check for any end-of-term or break clauses that would allow for a rent increase.
The table below shows the scenarios where you can increase rent depending on your type of tenancy.
| Type of Contract | Can I Increase Rent and By How Much? |
|---|---|
| Fixed Term (in play) | You can increase rent if there is a pre-agreed rent increase within the terms of the tenancy agreement OR by mutual agreement. |
| Fixed Term (past break clause date) | You can use the break clause to end the existing agreement and ask the tenant to sign a new agreement at your desired price. |
| Fixed Term (end of term) | You can increase the rent by signing a new agreement with the tenant at your desired price. |
| Rolling Periodic Term | At the end of each rolling period, you can enter a new agreement with the tenant at your desired rental price. |
| End of Fixed Terms Rolling on a Periodic Term Thereafter | At the end of each rolling period, you can enter a new agreement with the tenant at your desired rental price. |
If you are stuck in a fixed-term agreement with no clauses detailing the terms of a rental increase, you can still try the following ways to increase rent.
1. Seek mutual agreement with the tenant on a rent increase and provide a written record with both signatures.
2. Serve a section 13 notice (only for assured periodic tenancies)
3. Use a ‘Landlord’s notice proposing a new rent’ form to increase the rent after the fixed term has ended.
How Much Can You Increase Rent By?
Whenever you enter a new agreement with your tenant, there is no limit on what you can ask for in rental payments. Usually, landlords increase the amount in line with RPI or CPI inflation, or they use a letting agent’s valuation of the property rental market to reach a fair rental figure.
The UK Government sets out specific guidelines for increasing rent during a fixed-term agreement. They suggest that you should seek your tenant’s permission if you want to increase the rent by more than previously agreed, and that the rent increase should be fair and realistic.
If you want to increase rent fairly while retaining your tenant, you can look at the current average local rents. You can figure out the local rent prices by talking to property management specialists like Flex Living who follow market trends closely, or by looking at current asking prices on online rental platforms.
If, however, you have a pre-agreed rental price in your contract, the amount you can raise rent by is capped by the amount mentioned in the agreement.
How to Increase Rental Income
First, though, check if there are any breaks or clauses that specify rental increase rules. For instance, say you have a 12-month tenancy. You could have a clause in your agreement that states rent can be reconsidered after the first six months. In this case, you could increase the rent after these six months (as long as the increase is fair and in line with the Unfair Terms in Consumer Contracts Regulations 1999). Your agreement might also contain an inflation index clause, which amends the rent each year depending on inflation. Ultimately, if you have a clause specifying a particular rental increase at a designated time, this increase is acceptable because the tenant would have agreed to it when they signed the contract at the beginning of the tenancy.
Increasing Rent for New Contracts
This is the most straightforward rent-increasing option. By signing a new tenancy agreement, you can change the amount of rent you charge.
Increasing Rent for Existing Tenants on Fixed Contracts
If your agreement contains a clause that permits rent increases mid-tenancy, you can increase the rent per the terms of the agreement (that is, you can increase the rent by the designated amount and in the given time period specified in the contract). You could also change the rent mid-tenancy if you can reach a mutual agreement with the tenant. This might be the case if a tenant prefers an incremental increase in rent over time rather than a sudden and larger increase later down the track. It’s helpful to always keep the tenant informed of any rent increase clauses to reduce the chance of disputes later on.
If the contract does not contain a clause that permits rent increases mid-tenancy, you will usually have to wait until the fixed term ends. Once the fixed term ends, you can create a new tenancy agreement with your new rates, to which the tenant must agree and sign.
Increasing Rent for Existing Tenants on Rolling Contracts
If your fixed tenancy agreement expires and you want it to roll into a periodic contract, you may want to create a Rent Increase Agreement to specify the new rent amount. Law Depot has a free rent increase notice creator, so you can provide your tenant with a letter for increasing rent.
If no rent review clauses exist and your tenant disputes this rental increase, you can serve a section 13 notice to increase the rent during a periodic tenancy without the tenant’s agreement. You can only use a section 13 notice once a year and only in assured periodic tenancies. You should also give adequate notice of the intended increase – one month’s notice (for weekly or monthly tenancies) or six months’ notice (for yearly tenancies). If the rolling contract did not start as a fixed-term tenancy, you cannot serve a section 13 notice in the first year.
For more helpful information on types of tenancies, please read our article on tenancy agreements for landlords.
Increasing Rent with Mutual Agreement
If there is no inclusion of rent increase clauses in your agreement and you don’t want to use a section 13 notice, you can talk to your tenant and try to reach a mutual agreement about increasing rent. You might discuss the appeal of a slight, gradual increase in rental cost compared to a sudden jump at the end of an agreement. If your tenant agrees to these increased rental costs, create a Rent Increase Agreement that specifies the new rent amount to show that both parties approve.
When You Might Not Increase the Rent
In some situations, increasing the rent may not be the best option for landlords in the long run. For instance, consider the intrinsic value of your tenant. Is your tenant a clean, respectful person who causes few issues and takes care of your property?
You could find a tenant who pays higher rent, but they might bring additional costs if they don’t respect your property and leave you out-of-pocket with maintenance expenses. Sometimes, reaching a mutual agreement with a good tenant and meeting somewhere in the middle regarding rental increases is a valuable move for you and your property.
Simple Landlording with Flex Living
For more useful information on tenants, read the following articles:
- How to Find Tenants
- Tenant Referencing
- Failed Tenant Reference Check
- Tenancy Agreements for Landlords )
- Is it Safe To Rent to Council Tenants