Navigating rent increases under the Renters' Rights Act

On the 1^st of May this year, many of the key measures within the Renters’ Rights Act come into force - including the new rules on rent increases.

Here’s what you need to know about how the process will change.

Currently, rent can be increased in the following ways:

• A ‘rolling’ rent increase can be written into the tenancy agreement.
• Rent can be increased at any time during the tenancy if the tenant agrees – this should always be confirmed in writing.
• A Section 13 notice can be issued no more than once every 12 months, giving the tenant one month’s notice of an increase.

But from May, the rent can only be increased once a year, and this must be done via the issuing of a Section 13 notice that gives the tenant two months’ notice. Any rent increases written into current tenancy agreements will no longer be enforceable.

The proposed rent must align with current market rates, which essentially means it can’t be higher than what could be achieved if the property were re-let to a new tenant.

If we (or another agent) already manage your property and tenancy, this will all be taken care of on your behalf. But if you currently self-manage, it will be important to carefully research market rates to be sure that what you’re proposing is fair and realistic.

What will happen if the increase is too high?

If you propose an increase that the tenant feels is unfair currently, they can already take the matter to the First-Tier Tribunal. However, a lot of tenants are put off going down this route for two key reasons:

1. There’s a possibility that the Tribunal could decide a ‘fair’ market rate is actually higher than what the landlord is proposing, in which case the new rent could be set at this greater amount.
    
2. If the increase is upheld, it can be backdated to the Section 13 expiry date, meaning the tenant could end up owing several months’ extra rent that they may not be able to afford.

Under the new Renters' Rights Act, tenants have greater protection, ensuring there is no financial downside to them challenging an increase. As a landlord, you need to be aware of these changes, because your rental income will be impacted to some extent if your tenant goes to the Tribunal:

• The Tribunal will no longer be allowed to raise the rent above the amount proposed.
• ‍The new rent will no longer be backdated – it will simply take effect from the date of the Tribunal ruling. So, the longer the process takes, the more months your tenant will continue paying rent at the current amount.
• If the Tribunal considers that the tenant is suffering financial hardship, it has the power to defer the increase by up to two months.

How can I avoid an increase being challenged?

The first step is to check your records to make sure the rent hasn’t been increased in the last 12 months.

Then, make sure the new amount you’re proposing is fair. Although you should always aim to protect your profits by keeping annual rent increases in line with inflation, it’s not necessarily that straightforward, as rents are also dependent on affordability and how much wages are rising.

If a qualified agent, such as ourselves, is handling the increase for you, they will know exactly how much is reasonable to charge. If you’re self-managing, you can look online at current advertised rents but do make sure you’re comparing like with like in terms of location, the size and condition of the accommodation, and amenities or services that are included.

Once you have decided on the new rent, it’s advisable to speak to the tenant before issuing the written notice. That way, you can explain why it’s increasing and answer any questions they might have.

Finally, make sure you always use the current legal version of the Section 13 notice, which will be available on the government website.

If you have any queries or concerns about these new rules or would like to find out about our management services, just get in touch with your nearest branch and speak to one of the lettings team. And if you want to know more about any aspect of the Renters’ Rights Act and how it will affect you and your rental property, you can check out our online guide. 

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