Landlords' Guide to Increasing Rent Legally

Private rents are going through the roof as fewer private homes are available.

In the past year, average rents have climbed to £1,243 a month - an increase of 10.3 per cent in a year, according to data from tenant referencing firm Homelet.

Understandably, landlords want to ensure their investment properties rent for a fair and competitive price, but strict rules dictate how and when to review rents to stop a free-for-all.

Most of these contracts are assured shorthold tenancy agreements (AST), but a few have special protection under a regulated tenancy.

The key for landlords is understanding what type of tenancy governs the property to correctly apply the rent review rules.

What are the types of tenancy?

Most buy-to-let are rented on assured shorthold tenancies (AST) that are fixed-term or periodic.

• A fixed-term AST typically runs for six or 12 months. A landlord can only hike the rent during the fixed term if the tenant agrees (or has agreed via a term in the tenancy). If the tenant disagrees, the rent rise must wait until the term's end.
• A periodic tenancy has no end date and rolls over weekly or monthly. Generally, a landlord can raise the rent once a year.

A regulated tenancy is rare. The tenancy applies to an agreement starting before January 15, 1989. Rents can only increase to the registered rent or ‘fair rent’ - the maximum for a neighbourhood set by the Valuation Office Agency (VOA).

If a tenancy is regulated, the details are on the VOA’s fair rents guidance.

Landlords can generally ask the VOA for a rent review every two years, but an interim review is allowed if the property has had significant repairs or a refurbishment.

Telling a tenant the rent is going up.

The tenancy agreement is the first place to look at how to increase rent. Many AST agreements spell out the procedure for raising the rent. Landlords should follow what the AST says. There is a little-known case that said where a tenancy is “statutory periodic” (not contractual periodic like Guild agreements), that any rent clause during the fixed term is not passed into the statutory periodic tenancy (London District Properties Management Ltd & Ors v Goolamy & Anor (2009) EWHC 1367). If there is a dispute with the rent being increased using a clause, the landlord may issue a section 13 notice instead (see next).

If the AST has no rent review clause, landlords can:

• Offer a new AST with an increased rent at the end of a fixed-term AST.
• Negotiate a rent increase with the tenant. Both sides should agree to a new rent and keep a written record of the negotiations.
• Issue a Form 4 Landlord’s notice proposing a new rent outlining the details of the increase under Section 13 of The Housing Act 1988.

This notice should give the tenant a month’s notice of the date the rent will go up if they pay weekly or monthly rent. The start date of the new rent must be a rent day.

If the rent is billed yearly, the notice rises to six months. For a billing period of more than a month but less than a year, the notice is the same as the billing period.

Only use the Section 13/Form 4 procedure once every 52 weeks.

If the AST has a rent review clause:

• Issue a letter outlining the new rent and identifying the clause.
• Remember, if the tenancy is “statutory periodic”, the High Court has held that a rent review clause in the fixed term is not imported.

For regulated tenancies, give notice of any rent increase in writing. The notice should explain how much the rent will rise and from when. However, the rent cannot increase more than the VOA’s registered rent for the area.

Rent disputes

Tenants can apply for a hearing before the First-Tier Tribunal (Property Chamber - Residential Property) to settle a periodic or fixed-term tenancy rent dispute.

The VOA handles regulated tenancy rent disputes. Tenants can appeal the VOA‘s decision to increase a registered rent by writing to the rent officer within 28 days of receiving the notice. The case will transfer to a tribunal for a decision.

The tenancy is no longer regulated.

Regulated tenancies can stop for several reasons, but the status remains until the landlord and tenant lodge an application form with the VOA. The VOA can take six weeks or more to apply the change.

More information

More information about increasing the rent is available in the landlord handbook.

Note: This information applies to privately rented homes in England. Different rules apply in Scotland and Wales.