How to broach rent increases with tenants

How to broach rent increases with tenants

For some reason, many private landlords worry about raising the rent. They are reluctant to approach their tenants and broach the subject of an increase. It's understandable. Talking to anyone about money is never easy especially when it concerns another person’s finances. You may worry the tenant can't afford the increase or will react angrily and move out leaving you with an empty property and no rent return.

The ideal time to raise the rent is in between tenancies. When there is no tenant in situ to deal with. But sometimes you will need to increase the rent during a tenancy. In this case, you just have to grab the bull by the horns and raise the issue. As well as the rent.

Why you may need to raise the rent

The current rent is below the local market level

You're running a business and making sure you charge a competitive but realistic rent is essential for finding tenants. But if you have set your rent too low you should have no qualms about raising it to the appropriate level.

You haven't raised the rent for a couple of years

You may be satisfied with the income your property is generating but take a look at your bottom line. Your rent may not have risen for two years but you can bet your last penny your costs have increased. You may have no option but to increase the rent to keep your profit margin. Speaking of which...

Rising costs

As a private landlord, you need to keep on top of expenses. The costs of running your business can soon add up. And they are bound to increase over time. This could include:

  • Legal or letting agent
  • The cost of complying with new legislation.
  • Property maintenance.

Costs you need to meet. As your costs increase so should your rent.

You've improved the property

Since you set the rent you have improved the property. Maybe you've added new fixtures and fittings, white goods or added en-suite bathrooms. Whatever the work you have done if the current rent no longer reflects the property's spec you should raise it to an appropriate level.

How to approach your tenant about raising the rent

As with any dealings you have with your tenant you should be reasonable when approaching them about raising the rent.

Give plenty of notice. You must give at least 30 days but try and give longer if you can. 60 to 90 days would be ideal. This gives the tenant plenty of time to react and prepare for the increase.

Explain why you're raising the rent. The tenant doesn't need to know every last detail but a simple and clear explanation from you will go a long way to smoothing ruffled feathers.

Show the tenant they are still getting a great deal. Go along armed with market comparisons. Show the tenant how much other comparable properties in the area cost to rent.

Have the courtesy to speak to the tenant in person. Or at least over the phone. It's always better to deal with these issues in person rather than email or, heaven forbid, by text.

When you can raise the rent

During a fixed term assured shorthold tenancy you can only raise the rent if there is a rent review clause in the agreement.

The rent review clause should include the date the increase will occur and the notice you will give the tenant. It will also include how much the rent will increase by or the formula used to calculate the new figure. The clause becomes invalid at the end of the fixed term unless the tenancy continues as a periodic tenancy.

If there is no rent review clause in the tenancy agreement you will have to use a section 13 notice to increase the rent. You can only do this once a year. You have to give at least one months’ notice though as we discussed earlier try and give longer if possible.

You can also serve a section 13 notice during a fixed term tenancy. But you can't implement the increase until the fixed term ends.

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