More than 41 per cent of residential landlords in the UK expect their rents to rise in 2011, says recent research by Paragon Mortgages. And most predict that they will increase the monthly rent when their rental property is vacated by a previous tenant.
Last year landlords profited greatly from rent increases due to a lack of supply in the rental sector. Rental prices for UK properties increased by 0.9% in the final quarter of 2010, which pushed rent levels to their highest level since October 2008.
According to Paragon’s survey, 45 per cent of landlords expect that demand for rental properties will increase over the course of the coming months and that demand will continue to be several steps ahead of supply in 2011, much like it was for most of last year.
But how do you raise the rent on your rental property? With Lawpack’s Rent Increase Notice (Section 13), no landlord need feel apprehensive about the process of giving a tenant notice of a rent increase.
Raising the rent from time to time is something that has to be done. As with everything else, landlords’ costs go up from year to year; so increasing the rent from time to time should be routine with all residential tenancies.
An annual adjustment is the norm and it’s recommended that rent increases are phased at frequencies of not less than every two years.
It’s possible to raise the rent during the fixed term of a tenancy if the landlord and tenant can come to an agreement over the matter. But the tenant is under no obligation to make such an agreement and cannot be forced to do so.
If the tenant agrees to the rent increase, it’s important to get their consent in writing and Lawpack’s Rent Increase Notice can help. The notice includes a Rent Increase Agreement download – written by a landlord and tenancy specialist solicitor – which can help you to record the tenant’s agreement to the rent increase.
If the tenant doesn’t agree to a raising of the rent, one tactic the landlord can use is to serve a Section 21 Notice to terminate the tenancy and, therefore, give the tenant a choice of either signing a new tenancy agreement at a higher rent or vacating the property at the end of the fixed term.
Landlords often increase the rent when they come round to renewing a tenancy agreement, as this makes it easier for them to evict a tenant if they disagree with the new rent terms. At the start of a new fixed term agreement any rent increase should be agreed by both landlord and tenant.
After the initial fixed period has ended, if the landlord hasn’t served a Section 21 Notice, but the tenant is allowed to stay and continue paying rent on a monthly, fortnightly or weekly basis, then the tenant is renting through a periodic tenancy agreement and the tenancy continues as a ‘statutory periodic tenancy’.
During this periodic tenancy there is another statutory method for landlords raising the rent – by serving a Section 13 Notice.
A Section 13 contains information on the rent increase and the starting date for the new rent proposed. Lawpack’s Rent Increase Kit includes the Section 13 Notice, plus expert guidance notes on how to complete the form. All contents of the Rent Increase Notice have been approved by landlord and tenant solicitor David Smith.
The key part of the Section 13 Notice is the date of the rent increase. This date must be at least 12 months after the date the tenant first moved into the property and must also be at least 12 months after the last rental increase.
Therefore, if a tenancy was for an initial fixed term of six months, then after the fixed term, if no Section 21 Notice was served, it would continue as a statutory periodic tenancy. But it would not be possible to use the Section 13 process immediately after the fixed term came to an end; you would have to wait until the periodic tenancy had been running for six months before the Section 13 Notice procedure could be used.
In the case of weekly, fortnightly or monthly tenancies the notice period must not be less than one month’s notice from the date of service of the Section 13.
It does help maintain good relations with the tenant, however, if you give as much notice as possible of a proposed increase in rent.
The date of the rent increase must be at least one month from the date of service of the Section 13 Notice and must be on the first day of a period of the tenancy. This is normally a day that the rent is due. Therefore, if the tenant pays his rent on the 5th day of the month, the date of the rent increase on the Section 13 Notice must be on the 5th day of a month.
For all weekly tenancies the law requires that the landlord provides the tenant with a rent book. This should be amended when any new rent comes into effect.
Once the Section 13 has been served the tenant has until the date of the rent increase, which will be specified on the Section 13 Notice, to take action. If the tenant takes no action before the date of the rent increase specified on the Section 13 Notice, then the rent will automatically increase on that day by law and the tenant has no further chance to do anything about it.
If the tenant wishes to contest the level of the increase, they can apply to the Rent Assessment Committee (RAC) to ask it to determine if the increase requested on the notice is a fair market increase.
If the landlord doesn’t follow the correct procedure and issue a Section 13, the tenant can continue paying the set amount of rent. The tenant may even be able to recover extra rent paid in response to the landlord not following the correct legal procedures.
But if a tenant disputes the rent increase, this could lead to them being evicted if the initial fixed period has ended.
Published on: March 16, 2011