How to increase your rent

As a landlord, there are various potential dangers of raising the rent that you charge on your property. After all, the last thing you’d want to do is to raise your price to the point of making your accommodation unaffordable for your dream tenant, who may well be your current one. If this is unavoidable, then you will need to be sure that you can find a new tenant, and quickly, so that you do not miss out on potential rental income while awaiting the filling of your vacancy.

Exactly how you do increase your rent will depend on the type of tenancy that you have agreed on. The most common is a fixed term tenancy agreement, usually lasting six months. This type of agreement prevents you, as a landlord, from increasing the price of renting your property during that period for which it runs unless the contract has provisions that specifically allow for this possibility. Such provisions may come in the form of an escalator clause stating that after six months, the rent will increase to keep up with inflation. That said, such an inflexible clause is avoided by most landlords, who will usually simply reconsider the rent when the time comes to potentially re-let their property when the fixed term tenancy ends. This allows them to judge the overall state of the market in order to work out the wisest level of rent. In central London, for example, rental inflation still towers over general inflation, so landlords there need to keep their rent priced in line with the former rather than the latter. Even if they decide to re-let to the same tenant as previously, they can easily raise their rental charges anyway by simply creating a new assured shorthold tenancy complete with the revised price.

There is another type of tenancy that landlords may use, however: the periodic tenancy, which has end date as such. There are two types of periodic tenancy: the contractual period tenancy with no end date from the start, and the statutory periodic tenancy, which you’ll come across more often. This is the tenancy that occurs when a fixed term tenancy lapses. To increase the rent in this circumstance you would need to adhere to the procedure outlined in section 13 of the Housing Act 1988.

There are certain drawbacks to section 13 facilitated rent increases. Generally speaking, a ‘section 13 notice’, which is the term for the procedure needed to up your rent while maintaining a statutory periodic tenancy, will only permit you to do so once a year. This means that in a fast moving market as has lately been witnessed in certain areas of London and the South East, by the end of the 12 month period, your level of rent will be lagging behind the current market rent, causing you to lose possible income. Another potential disadvantage is that using a section 13 notice entitles a tenant who is dissatisfied with your proposed rental increases to apply to a Rent Assessment Committee. This determines what rent you could expect to successfully charge if, on identical terms, your property was being let on the open market. The Committee is able to heighten, lower or uphold the amount of rent that you have charged. The price of rent that the Committee decides upon becomes the legal maximum that you can set.

Despite appearances, there are several measures that you can take to either negate the powers of the Committee or to avoid it altogether. The simple solution is to first agree a fixed term tenancy, and secondly to not allow it to lapse, as it would then become a periodic tenancy. By issuing a section 21 notice as early as at the start of the contract, you will be able to end the tenancy at the end of the fixed term period. This allows you to simply re-possess and then re-let your property at a rate to suit a different incoming tenant.

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