Fair rent increase percentage: How much can a landlord raise rent in a year in the UK

Rent increase is a common concern for tenants and an interesting area for landlords. Although when signing a tenancy agreement both parties sign on a negotiated rent price, that doesn’t mean that it’s bound to remain the same throughout time. There may be economic changes or property market trends that assume an increase in the property’s rent. 

Regardless of whether you’re renting a property or you’re a landlord, being informed about what you can and cannot do when it comes to increasing rent is essential. There is a fair rent increase percentage in the UK that it’s important to consider, a rent increase notice that must be provided, and more. We’ll answer some of the top questions on a rent increase in the UK and share some valuable information.

When can a landlord increase rent in the UK?

There are a number of understandable circumstances that require a rent increase. For instance, perhaps the landlord needs to provide certainty that they’re able to make mortgage payments on time and able to keep up with the interest rates. Maybe the rental market has seen a shift and prices are no longer the same. Perhaps raising taxes requires a higher rent price or maybe the overall costs of living have increased dramatically. In addition, if the maintenance costs of the property are high, it’s natural that the rent prices will inevitably go up. 

However, if the rent increase is based on personal greed or an assumption that the property is worth more than it actually is, this is not considered a fair rent increase in the UK. 

If you’ve signed a periodic tenancy of either a week-by-week basis or month-by-month, the rent can only be increased once a year. If there are more increases during the same year, the landlord would need to receive the approval of the tenants.

If the tenancy agreement is fixed-term, with a start and finish date, the landlord can only make rent increases if the tenants agree, regardless of how many times a year. Given that the landlord does not receive approval, the rent can only increase once the fixed term of the contract ends. However, there’s an exception to this statement when there is a clause in the tenancy agreement allowing your landlord to increase rent under certain circumstances. 

How much can a landlord raise rent in a year in the UK?

According to the government, landlords must abide by rules for a fair rent increase in the UK. This means that the increase should be realistic and in accordance with the local average. To establish what’s fair and reasonable, it’s best to look at properties just like yours in your neighbourhood and identify how much their rent is. However, it’s also important to consider the fair rent increase percentage. 

So what is the average increase in rent per year? A normal rent increase is considered anything between 3% and 5% on a yearly basis. For instance, if a property just like yours in your area costs £700 per month, it’s unrealistic to set its monthly rent to £1,100. So what is the maximum rent increase allowed in the UK? Although there’s no precise answer to this question, the recommendation is to always consider the average rent increase percentage and avoid going above it. 

How should a landlord make a proposal for a rent increase? 

In some cases, the procedure of increasing rent will be explained in the tenancy agreement. It’s important to make sure you’ve carefully read any relevant information in the contract to ensure you know what to expect if you’re a tenant and how to act if you’re a landlord. If there is no clause explaining this procedure, the landlord has a few options:

  1. Renew the tenancy agreement when the contract ends: At the end of the fixed term, the landlord can renew the contract with an increased rent. The new rates are included in the new tenancy agreement and both parties agree. This is considered one of the quickest and easiest ways to approach the situation. 
  2. Notify the tenants about the rent increase during the fixed term: If your tenancy agreement has a clause that permits mid-tenancy rent increases, the landlord can simply document the increase with a notice. The notice must be written and submitted at least one month in advance if the rent is paid weekly or monthly and six months in advance if you have a yearly tenancy. 
  3. Reach a mutual agreement: If both parties agree on the rent increase even if there is no clause included in the contract, the landlord must still follow the process of documenting the rent increase in the agreement. 
  4. Create a Rent Increase Agreement: In case that both parties don’t want to create a new tenancy agreement once the fixed dates have expired, it’s best to create a Rent Increase Agreement and roll into a periodic tenancy. 

It’s important to note that if the tenant does not agree with the proposed rent increase during a fixed-term contract, they can refuse and raise a dispute to a tribunal with the main objective of challenging a section 13 rent increase. During the process, the tenant is still obliged to pay their rent at the existing rate. In case the rent increase is approved and considered fair but the tenant still refuses to accept, the landlord has the right to serve a Section 21 – Notice of Possession Order Form, which grants the landlord possession of the property once the fixed term expires. 

Stay informed about rent increase in the UK

Approaching a rent increase unprepared is a risky endeavour that could lead to a number of negative consequences along with loss of time and money. No matter if you’re a tenant or landlord, make sure you’re always well informed about your rights and obligations. If you’re uncertain about the process, get in touch with professionals who can provide you with reliable and expert advice.