As the excesses of Christmas are behind us, I believe now is a sensible time of year to assess whether the rent should be increased at the properties I manage.
Rent cannot be increased on tenancies that are still within the initial ‘fixed-term’ period (normally 6 or 12 months). For those that fall outside this, the rent can be increased by the landlord usually no more than once a year, with one or two months’ notice.
Any increase should be “fair and realistic” and ideally made in agreement with the tenant, otherwise they can refuse the increase and ask a tribunal to set the rental figure.
Now, I should stress that I don’t see it as ‘the norm’ to increase the rent as a matter of course. I particularly dislike tenancy agreements that have onerous automatic rent increase clauses built into them. In fact, I would far rather reward a tenant by not increasing the rent, if they have paid on time each month and looked after their home; thus retaining them for a longer period.
Nevertheless, some landlords will take a less pragmatic view and will wish to ensure they’re receiving the ‘going rate’ at all times. For these landlords an annual rent review should assess what the market rate is for the property by analysing the supply on the market (just like you would when you initially let a property).
Showing these comparable properties to tenants can soften the blow of a rent increase, whilst I’d also suggest a compromise be made whereby the full rent increase isn’t passed on, thus providing good value to your loyal tenants.
The average rent in Chichester is currently £1,000pcm, which is almost identical to the average one year ago (£999pcm). It’s not surprising therefore that, having just completed the rent reviews for my landlords, in 87% of cases the current rent being paid matched what I would expect to re-market the property for; so no rent increases were recommended.
In the other cases a modest increase of £20pcm-£50pcm could have been warranted, but my landlords took the same view as me in maintaining the status quo.
Unfortunately, the landlords amongst you will be well aware of recent changes to taxation regimes negatively affecting landlords (particularly if you’ve just completed your self-assessment).
As such, my previous ‘relaxed’ attitude to increasing rents, in favour of adopting a good long-term relationship with a tenant who is known to pay the rent and look after the property, is having to be adjusted somewhat. I suspect other landlords are having the same dilemma, and their reluctance to increase rents, even when it would be reasonable to do so, will have to harden, ultimately leading to more rent increases to existing tenants.
If you’d like a ‘rent review’ for one of your properties, please get in touch and I’ll be happy to provide one free of charge.