Any landlord needs to be sure their rental property is a viable investment, and, from time to time, it may be necessary to increase the rent charged to guarantee a level of income and to stay in line with what is being charged for similar properties in an area.
You can do this in three ways:
- Incorporate a rent rise clause in the tenancy agreement. (It’s true, however, that many agreements don’t have a clause like this.)
- Suggest establishing a new agreement once the fixed term of the tenancy is up, including higher monthly rent payments.
- Suggest a rise via a Section 13(2) Notice of the 1988 Housing Act.
There are various reasons why a Section 13 order may be better than a new assured shorthold tenancy (AST) arrangement. For example, if your tenant(s) have been problematic, or your own plans for your property are uncertain, you may be less keen on having a new fixed-term agreement, which under current law must run for six months minimum.
Where an AST has elapsed and a tenant is still living in a place, paying rent but without a renewal agreement in place, what’s known as a statutory periodic tenancy kicks in, to which a Section 13 can apply, albeit with a few exceptions.
You can serve a Section 13 while an AST is still effective, although the rent increase won’t become effective until both the fixed term of the AST and the minimum notice period for increased rent have elapsed.
Applying a Section 13 order
You need to use Form 4 to serve a Section 13 notice. This includes new fixed charges (i.e. not variable fees such as energy bills) and when they apply. It’s four pages long, and, obviously, you need to take the time to fill it in carefully. (Get the date wrong, for example, and you’ll render the notice void.)
Bear in mind that any services for which you charge also need to be included in the tenancy agreement.
In terms of start dates for the higher rent, you can only increase it using Section 13 once every 52 weeks, i.e. yearly.
Equally, if a renter has successfully brought a rent review tribunal (called a Section 22), in a bid to reduce ‘excessive’ rent, again a year must apply from the date of the tribunal.
New rent must also be paid on the same day of the month or day of the week as previously.
What if my tenant(s) doesn’t want to pay the new higher rent?
If the tenant is not happy with the increase in rent, or discussing the matter with you, they need to seek a rent review as conducted by the Property Chamber’s first-tier tribunal.
They’ll need to do this before the proposed new rent comes into force, and to tell you that they are doing this. It can take weeks or months before such cases can be processed, during which time heavy rent arrears can build up.
An actual hearing may or may not take place, but if it does, and either the landlord or tenant is asked to supply information for it, doing so is a legal requirement.
A tribunal would look at the local rental market, and then set a higher or lower rent, or the one that the landlord has suggested, as the final figure. This decision is based on what the property could be reasonably expected to fetch in terms of rental income on the open market.
And if my tenants refuse to pay the new higher rent?
This would mean the tenant(s) built up rent arears, which can be reason for repossession, as long as the landlord can satisfy the legal conditions for this under what are called Section 8 or Section 21 orders. Both of these need to be served with great care or they can be invalidated, meaning any rent arrears owing to you will be lost.
How we can help
At Oakfield Estate Agents, we work in the thriving rental market across Hastings, Eastbourne and Bexhill. We fully appreciate that people are increasingly seeking the convenience and flexibility of renting during uncertain times, and so this is a growing sector.
Chief Executive Neil Newstead says: “At Oakfield we have many years’ experience of working with tenants and landlords alike, and there’s a lot we can do for both groups.
“No one really wants to have to charge more rent, much less to pay it. But in a growing marketplace, and in a part of the country where demand for rental properties is high, from time to time, like all other costs, increases are inevitable. We work closely with landlords and those living in their properties to ensure that rises are reasonable, within the law and in keeping with the current marketplace.
“We’ll also do all we can to work with tenants and property owners to negotiate and mediate, so that things don’t reach tribunal stage.”
Our lettings teams in our areas are highly experienced at the legal side of tenancies, and the associated paperwork. Whether you’re looking to rent in East Sussex, or have a house or flat to let out in one of our areas, get in touch with us today.