New rules on rent increases – Stay profitable while staying compliant

Key Changes to Rent Increases

If the Bill passes in its current form, new regulations will limit when and how landlords can raise rent.

Currently, there are three ways landlords can make a rent increase:

1. A ‘rent review’ clause can be written into the tenancy agreement.
2. If both parties agree, the rent can be increased at any point. This is most commonly done by signing a new tenancy agreement or a memorandum at renewal.
3. A statutory notice (Section 13, currently Form 4) can be served once in any 12-month period, giving the tenants two months’ notice of the increase.

But under the RRB, landlords will only be able to use the Section 13 procedure.

The new legislation is being introduced to ensure tenants don’t feel forced into accepting unreasonable rent increases for fear of being evicted.

Key changes once the legislation comes into force:

• The only way landlords will be able to increase rent will be via the Section 13 statutory notice procedure.
• Rent increases will be limited to once in any 12-month period.
• Increases must align with current market rates.
• Tenants’ rights to challenge any increase they feel is unfair will be strengthened.
  
  

What This Means for Landlords

Overall, the new rules mean landlords may experience a delay in keeping their rent at a fair market level. 

• Landlords will no longer be able to raise rents multiple times a year
• Rent review clauses in tenancy agreements will become unenforceable.

The new process for raising rents:

• Landlords must use a Section 13 notice, giving the tenant two months’ notice of the increase.
• The new rent must be in line with current market rates.
• Even if a tenant agrees to a rent rise, a Section 13 notice must be served first, otherwise the increase will not be valid.
• A Section 13 can only be issued once in any 12-month period.

If a tenant challenges an increase, it will take longer for the rise to come into effect: 

• The new rules will remove the financial risk for tenants, so we’re likely to see a lot more challenges.
• That additional workload for the Tribunal could mean a delay in getting cases through.
• Even if the new rent amount is ruled fair and valid, the increase will only take effect from the date of the ruling – it will no longer be backdated to the expiry of the Section 13 notice.
• If the tenant is struggling financially, the Tribunal could delay the increase taking effect for up to 2 months.

All this means it will become even more important for landlords to ensure rent rises are fair and to comply with the legal Section 13 procedure.

Steps for Landlords to Stay Ahead

• Check that the tenancy agreement doesn’t include any rent review clauses.
• Keep careful records of when the rent was last increased to ensure it is only done once every 12 months.
• Ensure you always use the current legal version of the Section 13 notice.
• Plan / budget for rent adjustments well in advance.

To reduce the likelihood of a tenant challenging a rent rise:

• Discuss any rent rise with your tenant before issuing a Section 13 notice.
• Be prepared to provide evidence that the new amount is a fair market rate.
• Work with a qualified agent that knows the market rent and keeps up with the law.
  
  

What This Means for Tenants

If the legislation passes as proposed, tenants will have greater security in terms of affordability, as they will know that their rent: 

1. Cannot be increased more than once a year.
2. Cannot be higher than current market rates.

It will also be made easier and less risky for them to challenge any rent rise they feel is unfair.

Currently, if they make a challenge via the First-Tier Tribunal, the Tribunal could decide that a ‘fair market rate’ is actually higher than the amount proposed by the landlord. The increase can also be backdated to the Section 13 expiry date.

Under the RRB:

• The Tribunal will be unable to increase the rent beyond the amount proposed by the landlord.
• The new rent will only apply from the date of the Tribunal determination – there will be no backdating.
• If the Tribunal considers the tenant is in financial hardship, they could defer the increase by up to 2 months.
  
  

Speak to a Property Expert

If you have any questions about future rent rises or concerns around ensuring your rental business remains profitable under the new rules, we are here to help.

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FAQs

1) How often can landlords increase rent?

Once the new regulations come into force, only once in any 12-month period.

2) Will these changes apply to existing tenancies?

Yes, all rental agreements will have to follow the new rules when they come into effect.

3) How much notice will landlords have to give for a rent increase?

Section 13 requires that the tenant is given 2 months’ notice.

4) Can a tenant refuse a rent increase?

Yes, tenants can challenge any increase they feel is unfair via the First-Tier Tribunal.

5) What will happen if a landlord raises the rent more than once a year?

The increase will be invalid, and the tenant can take legal action.

6) How should landlords determine a fair rent increase?

By comparing the advertised price of similar properties and staying within market trends. Our lettings experts are always happy to advise landlords on fair market rates.

7) Can landlords increase rent at any time during a tenancy?

Currently, yes. Under the new rules, increases will be limited to once per year. This must be done by issuing a Section 13 that gives the tenant at least 2 months’ notice.

8) What should landlords do if a tenant disputes a rent increase?

Provide evidence that the rise is fair and negotiate or seek mediation if necessary.