What is a reasonable rent increase and the right way to do it?

Valentina GolubovicValentina Golubovic
Last updated on:
September 5, 2022
Published on:
September 2, 2022

Read our guide to rent increase letters

Read the Guide

As the cost of living crisis worsens in the UK, more and more landlords are forced to hike rent prices due to rising interest rates and utility prices to protect themselves against inflation.

When can you increase rent?

You can increase the rent of an assured shorthold tenancy agreement if:

  • The original assured shorthold tenancy agreement has a rent increase clause
  • The tenancy has become a contractual periodic tenancy, and the rent hasn't been increased within the past year. 

When you cannot increase the rent

  1. If you and your tenant are in a fixed-term contract which does not have a rent review clause 
  2. If you have increased your tenants rent in the past year 

How to increase rent

Section 13 / Rent Increase Letter

A Section 13 (Rent Increase Letter) is a formal notice informing a tenant of an incoming increase in the rent they must pay for the remaining lease period. A minimum notice period must be provided.

The government guidance on the minimum notice period is as follows:

  1. Yearly tenancy - minimum 6 months’ notice 
  2. Less than a year - minimum of 1 month notice 

This notice should be used when proposing a new rent under an assured periodic tenancy (including an assured shorthold periodic tenancy) in England.

Things that can invalidate your Section 13

  • A notice period below the statutory minimum 
  • The rent increase letter contains errors 
  • The current tenancy agreement has a rent review clause
  • You must sign the letter 
  • If you are in the fixed term period of your tenancy

Curious about automated data extraction from documents?

Rent review clause 

A contractual term in tenancy agreements provides for how the landlord can increase the rent during the tenancy period. For example it could state the date/month when the landlord will review the rent and the notice period the tenants will receive. 

What is a reasonable increase?

There can be a lot of controversies around increasing rent, especially if you are a landlord who owns their property outright or your rent price doesn't include bills, meaning tenants are absorbing the high energy prices to come. In this instance, legally you can do increase your rent as long as it's within government guidance and regulation whether it is morally right is another question.

The government website states that “a rent increase must be fair and realistic, which means in line with average local rents”. One way you could asses a reasonable increase is to look at the market where your property is located to see what other landlords are charging. Make sure the properties are comparable. If your property is a 2-bed furnished flat, compare the prices of other 2-bed furnished flats.

Can the tenant challenge the increase?

The tenants can challenge your increase if it is unreasonable, provided they do so before the rent increase begins. The tribunal will look at similar properties in the area and decide whether the increase is justifiable. 

If you have done your research and the increase is reasonable, the tenant will be liable to pay the increased amount from the date the rent increase was suppose to begin.

Current economic outlook 

The Deposit Protection Scheme reports an 8.21% increase in the average rent in the UK between 2021 and 2022 while the ONS reports a 3.6% increase, excluding London for the same period. The increase in London rent prices can be attributed to inflation and more importantly demand outweighing supply as students and professionals flood the city after COVID. Savills expects rental prices in London to rise 18.3% by 2026. 

These statistics suggest that rent prices will absolutely increase. Check out Legislate’s lawyer-approved Rent Increase Letter which is robust, fair and can be tailored to your specific requirements in minutes by answering simple questions. If you would like to book a demo of Legislate, please book a time.

Create your rent increase letter now

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