Rent increase notices: What is a fair rent increase?
All tenancy agreements should include information on how and when rent will be reviewed. A lot will depend on the type of tenancy that is being used for the property, so check what the different types of tenancy are and the obligations to both landlord and tenant here.
However, this guide will cover rent increase notices for the most common type of tenancy, an AST or assured shorthold tenancy.
When can a landlord increase rent?
This depends on the type of tenancy. If a tenancy is ‘periodic’, which means rolling on a week-by-week or month-by-month basis, a landlord cannot normally increase the rent more than once a year without first getting an agreement from the tenant.
For a fixed-term tenancy (one that runs for a set period) a landlord can only increase the rent if the tenant agrees to it. If they don’t agree, the rent can only be increased once the fixed term ends.
A landlord may also include a review clause in a contract to increase the rent. This clause will set out when the increase will happen and the amount of notice that will be provided to the tenant. It should also include a formula or system by which the rent increase will be calculated. This is so it is completely clear by how much the rent will be increased by.
If a tenancy agreement does not include a rent review clause, or this has expired and the landlord still wishes to raise the rent, a landlord can use a procedure known as a section 13 notice.
A section 13 procedure can only be used once a year and a tenant must have at least a month’s notice of the proposed increase for weekly or monthly rental agreements. If the tenancy agreement is for more than a month, a tenant is entitled to more notice (usually 6 months).
A landlord can serve the notice during the fixed term of a tenancy, but the rent increase cannot take effect until after the fixed term has ended. If a tenancy didn't start with a fixed term, a section 13 notice cannot be used at all during the first year.
For a full breakdown of rent increases and the legislation involved, visit gov.uk.
How much can a landlord raise the rent?
A landlord must get a tenant’s permission to increase rent by more than any amount previously agreed. The amount they increase the rent by must also be realistic, for example in line with average rents in the area or relevant to the size of the property. For example, if all one bedroom flats in the area are around £600 per month to rent, a landlord cannot expect to set the rent for a one bedroom flat in the same place for £900 a month.
A typical rent increase is around 3-5% annually. According to HomeLet Rental Index, the average rents across the UK rose by 2.3% from July 2018 to July 2019. Rents tend to rise in line with inflation.
How much notice does a landlord need to give a tenant?
A landlord must always provide a tenant with enough notice before any increase in rent. A minimum of one month’s notice must be given if you pay rent weekly or monthly. For a yearly tenancy, 6 months’ notice must be provided.
As we previously explained, a landlord can't increase the rent during a fixed-term tenancy unless there is a rent review clause set out in the tenancy agreement that says the rent can be increased. Most assured shorthold tenancies start with a fixed term, meaning that for the first year of a tenancy agreement the rent cannot be increased.
How does a landlord propose an increase in rent?
If a landlord wishes to increase the rent on a property they can:
- Renew a tenancy agreement at the end of the fixed term, stating an increased rent
- Agree a rent increase with the tenant. There must be a written record of the agreement that both parties sign
- use a form called a ‘Landlord’s notice proposing a new rent’ which increases the rent after the fixed term has ended
Can a tenant refuse a rent increase?
A tenant can refuse an increase in rent and appeal to a tribunal to challenge a section 13 rent increase. The tenant must still pay the rent at the existing rate until a decision is reached. For advice for tenants on how to tackle a rent increase dispute, try Shelter England’s guide.
If a tenant and landlord cannot reach an agreement on rent, the tenant may decide to move on. Read about Ending a tenancy here.
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