What is a fair rent increase percentage in the UK, and how frequently landlords can implement a rent increase?
Your tenancy agreement should include information on rent increases as well as when and how you intend to do a rent review. When you are allowed to review the rent and how much you increase it will likely be dependent on the property, tenancy type and length, and the current market.
This article outlines a few of the central considerations for landlords around rent increase notices, what is a fair rent increase percentage in the UK, and how frequently landlords can implement a rent increase.
As a landlord, you will want to keep the rent in line with the current market rates. Charge too much and you’ll put off prospective tenants and have high vacancy rates. But charge too little and you are losing money, this paired with recent regulatory changes could make it incredibly hard to make a profit.
For example, landlords can no longer deduct mortgage interest as an allowable expense. Additionally, recent EPC changes have meant many landlords have had to increase spending on their properties. Other changes that landlords need to know about are the potential capital gains tax changes and the suggested EPC changes that will be implemented as soon as 2025.
However, landlords can’t increase the rent as much as they want just because costs increase. Instead, rent increases should keep a property in line with current market levels and demands. For example, if other, similar properties in the same area are charging £800 a month then you should be charging something similar. If the average rent increase is 5% then you should increase the rent to match this market level.
Additionally, landlords can’t raise the rent whenever they want. When a landlord can raise the rent depends on the type of tenancy. For periodic tenancies, ie. a tenancy that’s on a rolling week to week, or month to month basis, landlords can’t generally increase the rent more than once a year.
For fixed-term tenancies, ie. ones that run for a fixed period such as six months or a year, a landlord can only increase the rent during the tenancy if the tenant agrees. If the tenant doesn’t agree the landlord can only raise the rent once the tenancy ends.
Landlords should also include a rent increase clause in the tenancy agreement. This clause will stipulate when an increase will happen and the notice period that will be given before the rent increase. This is so that it’s completely clear when and by how much the rent increase is likely to be.
If the landlord does not include a rent review clause in the tenancy agreement, or this has expired, a landlord may still be able to raise the rent by using a section 13 notice.
There are several ways for a landlord to increase the rent including:
The Housing Act 1988 provides for a Section 13 Notice to be issued by the Landlord to the Tenant in order to increase the rent after the initial fixed period has expired and the tenancy is in the statutory periodic tenancy, it cannot be used to increase the rent during the fixed term of a tenancy.
It’s also important to note that it cannot be used until 12 months after the start of the tenancy and cannot be used to increase the rent more than once every 12 months.
This route is not available in those cases where the Tenancy Agreement already provides stipulated terms for rent increases.
The Section 13 Notice must provide the following details:
For a full breakdown of rent increases and the legislation involved, visit gov.uk.
When the tenant is on a weekly or monthly rolling tenancy the landlord is required to serve a section 13 notice with at least one month’s notice before the end of the tenancy.
If the tenant is on a fixed-term annual tenancy six months’ notice is required before the rent increase can be put into effect.
The rent increase must begin on the day the rent payment is due. For example, if the rent is due on the 1st of each month then a rent increase would start and continue to be due on the 1st of each month.
A landlord can’t implement a rent increase during a fixed-term tenancy unless there is a rent review clause in the tenancy agreement or they otherwise get the written agreement of the tenant.
Most assured shorthold tenancies start with a fixed term, meaning that for the first year of a tenancy agreement the rent cannot be increased.
The amount that a landlord can increase the rent must be realistic and reasonable. For example, if similar properties in the area are renting for £500 /pm they couldn’t realistically expect to charge £700/pm. A fair rent increase percentage in the UK is generally between 3-5% annually. Rents tend to rise in line with inflation.
To determine exactly how much is a fair rent increase percentage is and ensure your property is in line with the fair market value you need to do an annual market rent review analysis.
If a rent increase is particularly large or the tenant believes the is above a fair rent increase they can refuse an increase in rent and appeal to a tenancy tribunal to challenge a section 13 rent increase. The tenant will be required to continue paying the current rent amount until this decision is made.
For advice for tenants on how to tackle a rent increase dispute, go to the Shelter England’s guide.
If a tenant and landlord cannot reach an agreement on rent, the tenant may decide to move on.
One of the main reasons that a tenant will move on from their current rental is because of a rent increase. If the rent increase is too large they may think they can get better value elsewhere. This will increase a landlord’s vacancies and the stress for a tenant. The increase must be fair and reasonable and the tenant must be given the appropriate notice beforehand. If the tenant thinks it is not a fair increase they can challenge the increase by referring the case to the Residential Property Tribunal.
It’s a good idea to do market analysis every year to ensure your properties’ rent stays in line with the other similar properties in the area.