Should I put the rent up?
Should I put the rent up? This is the million dollar question. You may have just learned that your tax bill, mortgage and insurance costs are all increasing, and now you’re wondering whether you should increase the rent to off-set some of these additional landlord costs. Increasing rent can be a tricky issue, especially if you have a good relationship with model tenants. Sometimes, increasing the rent can send completely the wrong message and it is better to leave things as they are. Most tenants appreciate that the rent has not been increased and will be more inclined to do those little odd-jobs around the house rather than calling you or your letting agent.
Here are a few things you should think about before deciding whether to increase the rent.
- Value good tenants; good tenants are worth their weight in gold. If you have a good tenant who pays the rent on time and takes good care of your property, it’s probably worth showing some appreciation by keeping the rent at the same level.
- Sometimes a rent increase prompts tenants to hand in their notice so take into consideration how much time and money it might take to find new tenants.
- Be aware of what the current rental market is like. If you know the rental market is weak, you don’t want to risk losing your tenant and possibly having a void period.
- Monitor current rental rates and find out current local rates for similar properties in the same area. It is far easier to justify a rent increase if you can prove that the rent you are charging falls well below comparable properties in the area.
- Don’t increase the rent too much. even if the Tenancy Agreement allows for an increase of £X amount, it should still be a fair and reasonable increase. If the increase is too great, your tenant could successfully appeal against it.
If you decide to go ahead and increase your tenant’s rent, first check the tenancy agreement to see if there is a rent increase clause. This would generally allow for an annual increase in line with CPI, but just because you don’t increase the rent one year, does not mean you can’t increase it in subsequent years.
If there is no rent increase clause in the tenancy agreement, there are other ways that the rent can be increased.
- By mutual agreement. Have a conversation with your tenant and see if they will mutually agree to an increase.
- Sign a new tenancy agreement with the new rental amount. This is one of the most common ways to increase rent. However, there are several compliance issues around setting up a new tenancy so make sure that you are fully up to speed with all the new regulations.
- Serve a Section 13 Notice to propose an increase in rent but make sure you use the correct procedure.
Dont forget that you must provide the tenant sufficient notice before a rent increase can take effect. For a monthly tenancy you must give at least one month’s notice and the rent increase must begin on the same day of the month that the tenancy started. For example, if the rent for the tenancy is due on the 1st of every month then the new increased rent should also be due on the 1st of the month.
Finally, remember that renting is a two-way street between a landlord and a tenant, and a rent rise is not a guarantee for boosting your profits. Think about offering a concession to ‘lessen the blow’, for example, you could suggest that you’ll aim for the rent to remain at the same level for a minimum period of e.g. two years.
Owner - Piccolo Property Services