As a tenant, you may find yourself wondering if your landlord can raise the rent on your rental property, and if so, by how much? This is a legitimate concern that renters have and a common mistake landlords make.
Especially if a landlord isn’t sure what they’re doing or they are a landlord that isn’t using an agent, there is a good chance that a landlord will increase the rent more than they are allowed which is why you should stay informed.
This is all a part of tenant management where a landlord is able to work out how much they should increase rent and what legal documents they need to do so. Just like if a landlord needed the right of access to a property or there was a need to pay service charge.
If a landlord has ever tried to increase your rent it could seem like quite a lot as you may wonder how much a landlord can increase rent in a year. In this article, we attempt to answer that question as it can get confusing.
There are also different factors for landlords increasing rent including the cost of running a property going up such as an increase in utility bills which will have a knock-on effect on the price of rent.
Towards the end of this article, how exactly when a landlord can increase rent and what tenants can do about refusing to pay more rent or contesting a rent increase or also be talked about.
How Much Can a Landlord Raise Rent in a Year?
A landlord can increase rent within reason so there is no exact figure or percentage that the landlord can raise rent. it just has to be reflective of the market rates in the local area.
There is no regulation around this in particular but a tenant disputes a rent increase if they want to and if they feel like the increase is too much in a year.
Having said this, a landlord cannot get carried away anyway because if their rent is too high in comparison to the local area they will struggle to rent out the property.
Some landlords increase rent every year as much as they can whereas others value the long term value of a tenant, if they are taking care of a property they may allow a lower rent for the time being.
Is there a legal limit to the increase of the rent?
Yes. a Landlord can only increase the rent in relation to the rent that is considered fair. For more on this topic click here.
However, this is still fairly subjective and if a landlord tries to justify a rent increase using this data yet the rent is still a lot more than the local area, a tenant is able to dispute the increase.
This is a problem for the landlord as a tenant then has the right to dispute a Section 13 rent increase so they no longer have to pay additional rental payments.
How much notice does a landlord need to give?
Adequate notice should always be given by landlords before increasing the rent for their tenants. If rent is paid on a weekly or monthly basis, at least one month’s notice must be provided, while six months’ notice is required for a yearly tenancy.
As mentioned earlier, during a fixed-term tenancy, rent cannot be increased unless a rent review clause is included in the tenancy agreement.
Typically, most assured shorthold tenancies begin with a fixed term, which means that the rent cannot be increased for the first year of the tenancy agreement.
The average rate of rent increase in the UK
As you can see from the graph, the change in rents is just more dramatic in London as opposed to the rest of the United Kingdom.
When rents go up in general, runs go up dramatically in London. On the other hand, when rent goes down, rents go down dramatically in London. This would imply that London feels the effects of shifts in the economy to a Greater extent.
What are the circumstances for a landlord asking for a rent increase?
A landlord may ask for a rent increase under different circumstances, such as a periodic tenancy, fixed term tenancy, or when there is a rent review clause in the tenancy agreement.
However, depending on the circumstance sometimes it is not allowed and sometimes it is. Below are the possible situations in which a landlord can ask for a rent increase.
In a periodic tenancy
Periodic tenancies are most tenancies. It is where a tenancy comes to the end of a fixed term and a break clause has been activated. As a result, the tenant is then able to leave with short notice and the landlord can also make changes.
These changes include being able to increase the rent of the tenancy agreement. However, the landlord still has to increase the rent by a fair amount and they can only do it once per year.
In a fixed term tenancy
In a fixed term of a tenancy agreement, a landlord cannot issue a rent increase. They have to wait for a break clause in the tenancy agreement in order to do so.
This is why the agreement is “fixed”. Not only is the landlord not able to evict the tenant in the property but they also are not able to change any of the terms of the agreement legally
In a break clause of a tenancy
Break clauses are where a tenant and a landlord agree that the contracts they have signed are open to renegotiation again. A tenant can leave with the right notice and a landlord can also evict a tenant.
A break clause is usually activated after 6-months of the tenancy agreement but it is common for break clauses to go on for longer such as after 9 months or even a year.
Usually, once the break clause is activated there is nothing a tenant can do about a rent increase as long as the rent increase is considered fair and the landlord has increased rent in the right way with the right notice.
What constitutes a fair rent increase over the period of a year?
Rent increases are considered fair if they are in line with the average rents of the area. Another way that landlords can determine if they are fair is by following government advice.
However the government fair rents no longer apply to Assured Tenancy Shorthold (AST) and it is instead just a guideline to follow roughly. Fair rents are there for government owned housing.
If a landlord is not sure how much to increase their rent, joining a landlord association and asking for some advice could be a good idea.
At the same time, as a landlord, do not be afraid to put your foot down on the costs that do matter. For instance charging enough rent to cover lock costs or refusing pets in your property.
Can tenants refuse a rent increase, and under what conditions?
There are some conditions in which a tenant can refuse to increase their rent payment. This includes if they think the rent increases on fair and the Section 13 notice they have been issued is illegitimately given.
For instance, if a tenant’s home is in bad condition such as if there is a leak in the roof or boiler is broken and the landlord hasn’t kept up to date with ensuring the property is habitable, then they could lose their rights to increase rent.
The same is true for any breach of a tenancy agreement like evicting tenants without the right notice, not giving tenants the rights to privacy or telling tenants they have to pay for professional cleaning when they don’t.
Landlords are required to provide a notice to increase rent, but how much notice is necessary?
To implement a rent increase, landlords must provide tenants with appropriate notice in advance. For monthly, weekly, or fortnightly tenancies, one month’s notice is required before the intended increase can take effect. For yearly tenancies, a six-month notice period is necessary.
Additionally, the date on which the new rent is required must not be earlier than a year from the date of the last increase using a section 13 notice.
If there is a new tenancy in place, the date must be no earlier than a year from the start of the tenancy. It is crucial to note that the rent increase should begin on the same day of the month that the tenancy started and not on any other day of the month.
For example, if the rent is due on the 28th of every month, the new increased rent must also be due on the 28th of the month.
What is a section 13 notice and when is it used?
Under the Housing Act 1988, if a landlord wishes to increase the rent, but it is not specified in the tenancy agreement and the tenant refuses to agree to the proposed increase, the landlord must issue the tenant with a Section 13 notice.
The landlord is responsible for completing the notice form, which includes information on the proposed rent increase and the starting date. The form provides guidance notes for both the landlord and tenant and is generally easy to complete.
It is essential to note that if a landlord decides to increase the rent without issuing a Section 13 notice, the tenant is not obliged to pay the increased rent, unless otherwise stated in the tenancy agreement.
If the landlord tries to obtain possession of the property based on unpaid rent resulting from the increase, the court may not accept the rent increases, and the possession order may be denied.
In some cases, a landlord may prefer to issue a Section 13 notice to the tenant, but in most instances, they may opt to end the tenancy if the tenant refuses to agree to the rent increase.
The topic of increasing rent for landlords is a difficult topic because a landlord has to make some profit margin after they have deducted all of the allowable expenses from their business.
Nonetheless, tenants should also have the right to know how much a landlord is allowed to increase the rent and it should be with the right notice as well as with the right habitability in a property.