Landlords have plenty of questions about how rent increases will work under the new Renters' Rights Act coming into effect on 1 May, so here’s a clear overview of what you need to know from our Director of Legal and Compliance, Manjit Kataora.
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After 1 May, the only way to increase rents for assured periodic tenancies will be by using the procedure set out in Section 13 Housing Act 1988 as amended by the Renters' Rights Act (RRA) itself.
Government has updated its guidance in this area.
The rules are that landlords will only be able to increase rents once per year and only after the first year of the tenancy has passed. The guidance helpfully suggests discussing any proposed increase with your tenant before serving notice.
A yet-to-be-published Form 4A will need to be used to serve notice of the rent increase. Guidance on how to use the form will be contained in the form itself.
Landlords will need to give their tenant at least two months’ notice before they want the rent increase to take effect. Notice can be served either in person (by physically handing it to the tenant), by post or by email. Notices served by post will need to factor in time for postage – at least two working days. Notices served by email will only be valid if the parties have agreed that notices can be served by email, that is, the tenancy agreement contains a clause to this effect.
Important to note is that even where the level of rent increase is agreed in discussions with the tenant, landlords will still need to serve a Section 13 notice formalising the increase. Rent increases cannot be implemented verbally or in any other written form.
As for the rate of the increase, RRA does not expressly cap rents but instead says that rent can only be increased by the open market rate. Excessive rent increases are therefore likely to be challenged by tenants who can apply to the First Tier Tribunal (‘FTT’). Where a tenant applies to the FTT, their rent will be held at its current level until the FTT has issued its decision. That decision will determine the date on which the rent increase (if upheld) can take effect. This might be some considerable time after service of the Section 13 notice itself, therefore there is no benefit to landlords in using this procedure to try and inflate rent levels.
Section 13 notices served before 1 May will be valid even if the new rent takes effect after that date. Note that currently the notice period under Section 13 is one month, but from 1 May it increases to two months.
Rent increase clauses in tenancy agreements entered into before 1 May but which take effect after 1 May will become void and unenforceable.
You can read the updated guidance here.
Source: This piece was authored by Foxtons Director – Legal and Compliance, Manjit Kataora, who has been working with Foxtons on the intricacies of legislation affecting London landlords for more than 16 years. If you have a question on the article, ask a Foxtons expert.
