RAISING YOUR RENT
Any landlord needs to ensure that their rental property is a good investment and to make sure this is the case, it may be good to increase the rent to maintain a certain level of income and stay in line with what is being charged for similar properties in your area.
How do I do this?
There are three main ways to do this:
- Add a clause into the tenancy agreement stating that there will be a rent rise during the tenancy.
- Ask your tenants to sign a new fixed-term agreement once the fixed term of the tenancy is up, including higher monthly rent payments.
- Suggest a rise via a Section 13(2) Notice of the 1988 Housing Act.
There are various reasons why a Section 13 order may be better than a new tenancy arrangement, such as if you have problematic tenants, or you plan about the property are uncertain.
A new tenancy agreement would have to run for a minimum of six months under the current law.
Where an AST has ended and a tenant is still living in a property, paying rent but without a renewal in place, this is known as a statutory periodic tenancy. If your tenant is in this kind of agreement, then a Section 13 could apply except for a few situations.
You can still serve a Section 13 if you have an existing fixed AST, although the increase would not be able to become effective until both the fixed term and the minimum notice period for increased rent have elapsed.
How do I apply for a Section 13 order?
You or your managing agent will need to use Form 4 to serve a Section 13 notice.
This outlines information of any new fixed charges (i.e., not variable items such as energy bills which may be included in the agreement) and when they apply. The document is four pages long, and you will need to make sure you fill it in carefully!!!
Be careful, if you get the date wrong, for example, the notice will be deemed void.
When will my higher rent start?
In terms of start dates, this can vary. You can only increase the amount using Section 13 once every 52 weeks.
If a tenant has successfully held a rent review tribunal in a bid to reduce ‘excessive’ rent, a year must apply from the date of the tribunal.
New rent must be paid on the same day of the month or day of the week as previously.
What happens if my tenant does not want to pay the new higher rent?
If the tenant is not happy with the increase and feels unable to discuss this with yourself or your managing agent, they need to ask for a rent review to be done by the Property Chamber’s first-tier tribunal.
They will need to do this before the proposed new rent is due to come into force, and they must also tell you that they are doing this.
It can take months before cases are processed, during which time heavy rent arrears could build up.
A hearing may or may not take place, but if it does, and either the landlord or tenant is asked to supply information for it, doing so is a legal requirement.
A tribunal would look at the local rental market, and then set a rental figure which is agreeable to all, as the final figure. This decision is based on what the property could be reasonably expected to fetch in terms of rental income on the open market.
What happens if my tenants refuse to pay the new higher rent?
This would mean the tenant(s) built up rent arrears, which can be a reason for repossession if the landlord can satisfy the conditions for this under either Section 8 or Section 21 notices.
These notices must be served with great care or they can be invalidated, meaning any rent arrears owing to you will be lost.