Increasing The Rent

Trying to increase the rent with an existing tenant is always a tough issue to tackle.

Here are the common problems that a landlord faces when considering the subject of an increase in rent:

• Fear of confrontation
• The suggestion may force the tenant to vacate
• May cause future tension in the tenant/landlord relationship

Is the increase needed?
Before making any quick decisions, ask yourself if the actual increase is needed. Don’t increase rates out of greed, because you could do more damage than good, especially financially. A landlord should always make a distinct clarification to determine whether the rate change is needed, or just put in place out of greed.

Some reasons why you SHOULD think about increasing rates:

• To keep up with interest rates on mortgage payments
• The changing condition of the rental market
• Rising taxes
• Escalating cost of living
• High maintenance property
• Want to make your tenant leave property

Some reasons why you SHOULDN’T think about increasing rates:

• You want more money
• You THINK your property is worth more

Things to remember

• The rent can’t normally be increased half way through a tenancy agreement unless the tenancy agreement states that the rent can be increased. If you’re trying to increase rent half way through a tenancy agreement, make sure you check the contract to ensure that you’re in your rights to do so. If the agreement allows for rent increases, you must give the tenant at least one months notice in writing before increasing the rent.
• If the tenant thinks that the rent increase during an agreement is excessive, the tenant can dispute the increase. The tenant should discuss the reasons for the increase with the landlord. If the tenant and landlord can’t come to an agreement, the tenant can contact the RTA’s Dispute Resolution Service for assistance in resolving the dispute. If they cannot resolve the matter through the RTA’s service the parties can apply to the Small Claims Tribunal for a decision.
• Good tenants are extremely difficult to find. If you have a good tenant that pays rent on time and takes good care of your property, it’s probably worth showing your tenant some appreciation by keeping the rates the same. Take into consideration how much time and money it would cost you to find a new tenant. You’ll probably end up losing money by replacing your old tenant, with a new one that is willing to pay your new rate. “If it ain’t broke, don’t fix it”For example:Your current tenant is paying £700pcm. You want to increase the rate to £750. If your tenant doesn’t agree with the new rates and decides to vacate, a letting agent could charge approximately 10% of the yearly rental rate to find you a new tenant. £700 x 12 (months) = £8400

  £750 x 12 (months) = £9000
  £9000 - £900 (10% of £9000) = £8100

  It will actually cost you £300 to increase rates and find a new tenant. Is it worth it? Of course, this example is based on a letting agent fee. If you plan on finding a tenant another way, make sure you weight your costs up before making any decisions.

• If you plan on increasing rates, make sure you tell your tenant 2 months before the contract is due to expire. That way if your tenant decides the new rate is too expensive and consequently would prefer vacating after the expiration, it gives you 2 months to find a new tenant. That should be an ample amount of time for you to get someone new lined up.
• Be aware of what the current rental market is like. If you know the rental market is booming in your area, then it’s a sensible time to increase rates, because you know you’ll easily find a replacement if worse comes to worse. You can ask your local letting agents what condition the market is like.
• Find out what rental rates other people are paying in similar properties in the same area. If you’re undercharging, you can use that as a bargaining token with your tenant. Nicely explain that you need to be keeping up with the economic change in the rental market, and currently the rent you’re charging isn’t up with the local market. That will make your tenant think twice about vacating, because if they decide to vacate they’ll only move into another property, paying the same amount that you initially wanted.
• Approach your tenant with tact. Remember, your tenant hasn’t done anything wrong, and they have every right to refuse the increased rate. Be understanding and supportive of your tenant. A tenant needs a good landlord just as much as a landlord needs a good tenant.

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