By How Much Can Rent Increase?

Inflation is a constant thorn in our collective sides, add to that interest increases on mortgages and increasing regulations and legislation, the costs of running a rental property business can seem like they are forever rising. To offset these cost increases, a landlord has the right to increase the rent on the property(s) that they are renting out and we will discuss the rules around how and when to do this in this blog article.

How to handle rent increases

It is always advisable that rent increases are dealt with within the tenancy agreement, which will should specify how often rent will be reviewed, the process of advising the tenant about a rent increase and how the increase will be calculated. The agreement must, however, follow Government guidance.

How often can rent be increased?

This depends on the tenancy type, for Assured Shorthold Tenancy Agreements:

  1. If the tenancy is still in the fixed term then there are two options:
    1. The landlord can request a rent increase from the tenant, but the tenant has the right to refuse, unless it has been written into the original Tenancy Agreement. If it is agreed, the there needs to be a written and signed document to that effect.
    2. The landlord will need to wait until the fixed term has ended and then renew the contract with an increased rent.
  2. If the tenancy is a periodic tenancy, then typically, rent can only be increased once a year.

What notice period is needed?

If the rent is paid weekly or monthly, then the typical notice period for a rent increase is 1 month. If, the tenancy is either a 1 year fixed or paid annually, then 6 months’ notice is required.

By how much can rent be increased?

There are no definitive rules on how much a rent can be increased by, the Government only states that the increase must be fair and realistic, which means in line with average local rents. Typically, rents rise in line with inflation, but the real test of reasonableness is whether the new rent amount is in line with average local rents. As such a landlord cannot reasonably ask a tenant to pay £900 for a property when the average in the local area for a similar property is £800. Be aware that if your current rental figure is well below the current average a big jump might cause your tenant to seek cheaper accommodation, you will need to weigh up the advisability of a large rent increase and every circumstance will be different.

Rent increases can be tricky and they are best dealt with in the contract. As long as they are done properly, with the right notice periods and in keeping with the average rents in the area for similar properties, then they shouldn’t be too onerous to manage.

Help managing your rental properties

If you need assistance managing any aspect of your rental property portfolio, from rent increases to inventory and check outs, or just a tenant find service we have a landlord service to suit. We have dedicated in-branch property experts, to find your nearest office please see here.