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Increasing Your Tenants Rent

Written by on 04 Oct 2007

Increasing rent can be a difficult issue, especially when you’re increasing rent to existing tenants. However, landlords will generally want to increase rent over time, to keep up with the level of inflation.

Potential problems with increasing rent

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
How to increase rent

Normally, rent is increased at the end of a fixed term, this is done by getting the tenant to sign a new tenancy agreement. However arranging a new tenancy agreement is not actually necessary (as the tenancy will roll on anyway as a periodic tenancy under the same terms and conditions – section 5 of the Housing Act 1988). However, if you want to increase the rent, doing this by giving the tenant a new tenancy agreement is the best way to do it.

If you do not want to give a new tenancy agreement, you can also get the tenant to agree the rent by signing and returning to you a copy of a letter sent regarding the increase. The fact that the tenant has signed and dated the letter will be proof that they have agreed to it.

The rent can’t normally be increased half way through a tenancy agreement unless the Tenancy Agreement has a review clause. But be careful, the clause must be fair and comply with the Unfair Terms in Consumer Contracts Regulations 1999.

One way to make a rent review clause fair is to specify what the new figure will actually be (ie say that it will increase to £X month after 4 months). This will be deemed fair as the tenant will have approved the actual amount by signing the agreement. What will not be deemed fair is a clause saying that the landlord can increase the rent to whatever he likes.

Don’t increase the rent too much

Referring to the previous point, even if stated in the Tenancy Agreement that the landlord is entitled to increase the rent by £X amount, it still has to be a fair and realistic increase.

If the increase is too great, the Court of Appeal can hold the clause as invalid, regardless of whether the tenant signed the agreement.

Points to remember
  • 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. As they say, “If it ain’t broke, don’t fix it”
  • 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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9 Comments - join the conversation...

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JOHN BARKER2010-05-20 19:10:43 Enjoyed reading some of the input.
keep at it 1
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Tim2010-09-02 17:08:42 You wrote:

"Some reasons why you SHOULD think about increasing rates:

* Want to make your tenant leave property"

So you'd give a BAD tenant a VALID reason to drag you through the courts as the bad guy? I'm glad you thought this one through... 2
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Jools2010-09-02 17:29:06 Sorry Tim, don't understand your reasoning?

Jools 3
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Tim2010-09-02 17:54:36 OK, dragging through the courts is a bit of an overstatement, but sending and unwinnable case to a rent assessment committee, thus providing documentary evidence of your own unreasonable behaviour in case of future proceedings, seems like a strange way of getting rid of a bad tenant. They give you enough hassle, surely, without you creating some more for yourself? 4
The Landlord Avatar
The Landlord2010-09-03 11:43:37 @Tim
A tenant can't complain unless the rent increase is extremely excessive. 5
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Jeff2010-09-14 18:23:40 @Tim,

Also, maybe they accept the higher rent, which makes their assholeness more tolerable. 6
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elizabeth webber2010-11-09 15:48:26 it is very difficult to make a decision to raise the rent on a property when you have a good tenant and I appreciate all the comments on this forum about good tentant/landlord relationships but in our case the tenant had already previously rented it and had to move out when the other tenant went to university. She was and still is a good tenant and we came to an agreement about the reduced rent (bearing in mind all your comments)but whilst negotiating this reduced rent (400 for a two bedroomed newly furnished flat on the edge of the beach with parking, no poll tax or water rates! compared to 650.00 for very similar accommodation and what she jointly paid previously ie 325 per month, she had always insisted she couldn't afford the original 500 we asked for as a sole tenant. She was totally unprepared to share with anyone but now we need to put the rent up, despite your comments you shouldn't put the rent up because you could get more, we are falling short of nearly 250. 00 per month and in this economic climate and when there are a lot of people looking for accommodation in our area, we cannot keep the rent so low any more. We are between the devil and the deep blue sea because she is a good tenant but we have a valuable commodity here that in essence someone else is enjoying and we are paying for it. Awkward situation 7
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Dan2011-02-25 00:37:31 Interesting comments from all...I'd be interested to see what you think of our situation.

We're renting a 2 bedroom detached bungalow with an annexe which is rented separately by the landlord. Our landlord has all bills in his name and so instead of renting at £750-800 the rent is £1100 inclusive of gas/elec/phone line (not calls) and council tax. This seemed to be average when we moved in two years ago but now he wants to increase the rent from £1100 to £1450! The letter said that he would be delighted to keep us on as tenants...I bet.

I should add that the tenancy is for my wife and myself only, no pets, no kids and we don't smoke. We've never paid late and have effected many repairs at our own expense as we got tired of waiting for the landlord, who lives abroad, to get them seen to. We were originally told that the property was agent managed but when we received the contract this was not the case but by then we'd handed in our notice on our previous property.

The property shares the hot water with the annexe and the girl there likes her baths menaing there is frequently no hot water. Also the fuse box is in the annexe and we don't have access to it. As there are lots of halogen bulbs they seem to blow frequently which trips the fuse (partially but not completely resolved by the LL putting much heavier fuses in... is this safe?). If the girl in the annexe is out we are without electricity for hours, or sometimes days if she's away, in part of our house...not great! We feel we should have been advised about this prior to renting but we weren't. By the way, the property was empty for over 6 months before we rented it and most of that time it was on the market. Now we know why.

Ok, first port of call...speak to local letting agents to see how much rental prices have climbed since we moved in as although everyone hates a rental increase we want to be fair. I was advised that 3-5% should be expected. Next I checked with the utilities company's and they've also increased by 5% (He's not with British Gas who's went up 7%). Incidentally, the gas and elec for both properties is around £140-150 pm. I know as I have to open this envelope, with the LL's permission, to know how much to pay for the calls. Then it was back to letting agents for their advice on what they would value the property at. We had various answers from £1100pm - £1200pm inclusive but they all said that £1450 was far too much considering the property condition and the shared resources with the annexe of hot water and fuse box. On top of this the unpaved, unadopted highway, road to the property has some severe potholes and my car (sensible saloon, NOT a sporty number) bottoms out every day and it's getting worse.

So, what are we to do? The obvious answer is to seek another property and part ways with our not terribly responsive landlord. Would that be the best course? We can easily get 2/3 bedroom houses or bungalows for £800-900 locally. Just looking for advice as I don't want to over react and I hate moving.

Thanks! 8
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Carol2011-07-14 18:22:30 I am approaching the end of my second year in my rented house. When i first moved in i paid £800pcm. At the end of the year the landlord increased it to £825pcm, now he wants to increase it to £850pcm. Every year i have been asked to pay an extra £300. Am i being petty and should accept the increase?
i have been a good tenant who always pays on time, never hassles him. i treat the house as my own. i painted the whole house when i initially moved in as it was tired and dirty, fixed the kitchen cupboards and weeded the the whole garden. what thanks do i get??? a rental increae. I think its unfair considering the about of work i have put into the property. i have always been under the impression that good tenants were hard to come by. what should i do?? 9

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