Raising the subject of a rent rise can take tenants’ tempers along for the ride. In this month’s column, Rob Cooke explains when and how to introduce an increase...
Can I increase the amount of rent paid during an assured shorthold tenancy?
An assured shorthold tenancy is usually for a fixed term and you cannot increase the level of rent during this period, unless there is a clause specifically allowing you to do so.
If at the end of the term both parties agree to an increase in rent, a new tenancy for a further fixed period can be granted. Alternatively, you can let the agreement run indefinitely as a statutory periodic tenancy under Section 5(2) of the Housing Act 1988 and apply for a rise using the appropriate legislation. The period will depend on when rent is paid, for example, if you receive monthly instalments, you have a monthly periodic tenancy.
The most sensible course of action is to address the issue as your current assured shorthold tenancy expires.
What if my tenants will not agree to another fixed period – how do I increase the rent during a periodic tenancy?
You must serve a Section 13 notice on the tenant to implement a rent increase.
If you have a monthly periodic tenancy, this means giving no less than one month’s notice of the rise. Once it has been agreed, you cannot increase the rent again for at least a year. If you decide to increase the rent without serving a Section 13 notice, the tenant does not have to acknowledge the rise, unless this eventuality is covered in the tenancy agreement.
If a fixed term assured shorthold tenancy is granted and is still in place, what happens to it if the rent is increased?
Because a rent rise cannot be implemented during a fixed term, you would need to serve a Section 13 notice as the appropriate window of opportunity arises.
This does not affect the status of the original assured shorthold agreement, but does create a periodic tenancy. In doing so, you would have to serve a Section 21 notice under the Housing Act 1988 if you then wished to bring it to an end.
What happens if my tenants don’t agree to the increase?
If your tenants feel the rent rise is unjustified, they can ask a Rent Assessment Committee to consider the proposal.
There are five regional committees in England and Wales who usually consist of a valuer, a layman and a solicitor.
They will normally visit the property and carry out research into the area before deciding on an appropriate level of rent.
When settling disputes, the committee looks at what you could reasonably expect to receive on the open market. It does not take into account any increase in the value of the property due to voluntary improvements made by the tenants or any reduction in value caused by their neglect. It may set the rent higher or lower than the sum proposed.
The rent fixed by the committee is the legal maximum you can charge and this amount will be payable from the date specified in the notice, unless it is deemed this will cause the tenants undue hardship.
You cannot appeal against the decision of a Rent Assessment Committee, except on a point of law. Therefore, rather than going down the section 13 route, some landlords decide to end their agreement if the tenants refuse to accept a rent increase.
Taylor&Emmet partner, Rob Cook, specialises in landlord and tenant issues.