Section 13 rent rises – how often and how much?
How and when you can increase your tenant’s rent is changing once the Renters’ Rights Bill comes into force. The bill will put new restrictions on increases and make rental price planning an even more important part of your letting strategy.
In the meantime, you can either include a rent review clause in your tenancy agreement to outline when and by how much you can increase rent, or you can follow the existing Section 13 process.
When you can increase rents
With a periodic tenancy – a rolling agreement – you can typically increase the rent only once a year. In the case of a fixed term tenancy, the rent can be increased only if the original tenancy agreement agreed between you and your tenant allows this through the inclusion of a rent review clause. If not, then you can only raise the rent once the fixed term ends.
To increase the rent if you don’t have a rent review clause you must give the tenant advance warning through a Section 13 notice (also known as Form 4) or a letter, signed by both parties, that outlines when and how the rent will increase. This cannot be served in the first year of a tenancy, however.
One month’s notice of the rent increase is required for tenancies up to a month. This increases to six months’ notice for a yearly tenancy. In all other cases the notice period must be equal to the length of the tenancy – for instance three months if it’s a quarterly agreement.
Form 4 outlines the proposed new rent and starting date, as well as any other changes to charges that might be included. It should be signed by the tenant and the landlord to show both parties are in agreement.
How much can you raise the rent?
Under the existing system the rent increase must be deemed fair and realistic, which is defined as being in line with existing rents in the local area. Tenants have the right to dispute the increase and take their complaint to the First Tier Property Tribunal if they think the increase is out of kilter with the rest of the market. The tribunal will decide if the new amount is fair and should be imposed or will determine a different amount to be paid if not.
How the Renters’ Rights Bill will change things
One of the biggest existing worries for tenants in objecting to or refusing a rent increase is the threat of a no-fault Section 21 eviction.
Under the new bill, rent review clauses in tenancy agreements will be banished and rent increases will be standard. They will be allowed once a year and will be set to market rate, defined as the price that would be achieved if the property were newly let. A Section 13 notice must be served, with the minimum notice period doubling to two months rather than just one.
A tribunal will no longer be able to set the rent beyond what the landlord initially proposed and backdated rent increases will also be abolished.
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