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How to increase the rent on a long-term tenancy

Increasing the rent is something all landlords will have to do at some point.  Many will choose to wait until their property is empty and will increase the rent for the next tenant.  But what do you do if you have a long-term tenant and you need to raise the rent they are currently paying?

As a landlord, there are procedures you need to follow whenever you want to raise a tenant's rent.   On a normal assured shorthold tenancy you can only increase the rent:

  • If your tenant agrees.
  • If there is a rent review clause in the tenancy agreement.
  • By notice under Section 13.

Increasing the rent by agreement with the tenant

You can increase the rent during a tenancy if your tenant agrees.  They must sign a letter confirming this.  But, and this really goes without saying, no pressure can be applied by the landlord.  The tenant is perfectly entitled to refuse to pay any proposed increase. 

Needless to say, few tenants will agree to pay more rent when they are in the middle of a contract.  Why should they? In this case, the landlord will have to put any increase on hold until the tenancy ends.

Rent review clauses

For lengthy fixed term tenancies, it is always wise to include a rent review clause.  However, any clause you include must comply with The Consumer Contracts Regulations.  You can't include vague clauses which would allow you to raise the rent to an unspecified level. 

What you can do is include a clause that raises the rent to a specific figure on a specific date during the fixed term tenancy.  By signing the tenancy agreement the tenant has already agreed to the increase.

Using Section 13

A landlord must give at least one month’s notice if using Section 13.  And it may be used only once per year.  Any increase will not come into effect until after the fixed term has ended. The tenant can challenge the increase but if they choose not to do so the new rent applies after the notice period ends.

Why you may want to raise the rent

Some tenants may think landlords raise the rent just because they can.  But they will be surprised to discover many landlords are in fact reluctant to increase the rent.  And many will rather maintain the status quo than risk upsetting the tenant with an increase.

But landlords shouldn't be afraid to increase the rent when there are very good reasons for doing so.  Most rent increases are due to economic changes and pressures.  Landlords should consider increasing their tenant's rent when:

  • Mortgage payments have increased.
  • The cost of living has risen.
  • The property needs maintenance or repair.
  • The current rent is below market value.

Do consider the tenant when increasing the rent

Carefully consider your tenant when increasing the rent.  A good long-term tenant, one who looks after your property, pays the rent on time, and treats the landlord with respect is worth their weight in gold.  Carefully consider the impact a rent rise will have on the tenant.

That is not to say you should never increase the rent.  But do open a dialogue and keep the tenant informed on why their rent is going up.  And make sure any increase is fair and reasonable.  

MakeUrMove provides a range of services for landlords including property management and electronic tenancy agreements.

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