The cost-of-living crisis may be a little less in the headlines than it was but that doesn’t mean the pressure on consumers’ finances has eased. Interest rates remain high, and while inflation has fallen from its peak there remains intense pressure on consumer budgets and a lack of consumer confidence in their finances.
Your tenants are being squeezed financially. But they aren’t the only ones. As their landlord you are facing the same pressures – coupled perhaps with inflated mortgage costs if you’ve had to remortgage recently or increased maintenance costs if your property needs work. And that might mean you need to increase rents to cover your own increased costs.
But how do you do that sympathetically, to ensure that you maximise your rent, but don’t lose tenants because of it?
When You Can Increase Rents
Firstly, you need to determine if you can actually increase the rent, which will be dependent on the type of tenancy you have signed with your tenants. In the case of a periodic tenancy you can’t increase your tenant’s rent more than once a year without their agreement. With a fixed-term tenancy you can only increase the rent within the fixed term if your tenants agree to the rise. If they don’t, you can only increase rents when the fixed term ends. Either scenario risks a tenant quitting your property.
A Fair Rent Increase
Any proposed rent increase must be “fair and realistic” which is defined as being in line with average local rents. So, if you’ve not raised rents in a while and they are far cheaper than other similar properties in the local area, then it’s fair and realistic to raise rents to match. Provide proof to your tenants to show that this is the case though, perhaps showing comparable rental adverts for your local area
Don’t put off raising rents for fear of upsetting tenants, however. Supporting your increase with evidence, and perhaps looking at small yearly increments will seem fairer than a sudden massive jump in monthly rental payments.
The Process to Follow
If your original tenancy agreement defined a procedure for increasing rent then you must abide by this. This will likely be a rent review clause that lays out when an increase will happen, the notice to be provided and how the increase will be calculated.
If rent reviews aren’t defined in the original agreement, then you can’t force a tenant to pay increased rents without their permission. You can increase rent at renewal after the end of a fixed term agreement, propose and agree a rent increase with a written record that both you and the tenant sign to confirm you are happy, or use a ‘landlord’s notice proposing a new rent’ (a Section 13 notice) which increases the rent after the fixed term ends and as a tenancy moves into a periodic tenancy.
A section 13 notice can only be used once a year and, if a tenancy didn’t start with a fixed term, can’t be used in the first year.
During this process communication is key so speak honestly to your tenants, perhaps directly or via a polite email. You could always offer an extra benefit for renewal that might make them more tempted to agree, such as replacing an appliance or a new feature for outside.
Giving Notice
Another important step to maintain good tenant relations is to ensure you abide by the notice periods to give tenants as much warning as possible. For tenants that pay their rent weekly or monthly then at least one month’s notice is required. If it’s a yearly tenancy, then six months’ notice is required.
A tenant can refuse to pay the increased rent however and appeal to a tribunal to challenge a section 13 rent increase if they feel it’s unfair. If an amicable agreement to a new rent can’t be made of course the tenant may decide to leave. This makes following the correct procedures even more vital.
We Can Help
At Progressive Lets we are experts in the rental market in the Peterborough area and help landlords find and manage properties within a 50-mile radius. Get in touch to find out more.
