Can I index link rents into my tenancy agreements?

DSR
A generally fair summary. You need to appreciate the difference in the contractual cycle to that of the statutory prescribed method. But a market rent remains the key to both.

For those who are going to read these many posts and moan that we are profiteering, they need to consider that although we provide an essential service market forces apply to us just as they do to supermarkets, that also provide essential services. We are also obliged to comply with numerous and changing government regulations that burden us with costs. Further, if we are to adequately maintain our properties we need constant source of increasing income to carryout those obligations just as the costs of such work constantly increases.

Unfortunately unlike the local self employed sole trader shop keeper we cannot offset our mortgage interest as an expense.

Reply to the comment left by at 23/05/2022 - 14:28
agreed about differences in TA's but principle is the same.
There will be a lot of LL's out there keen to not raise the rent to what MR suggests as lets face it if you have a great tenant why rock the boat.

On the flip side, I rent some properties just above the LHA rate (still below MR). I realise the tenant will have to pay the increase in the form of top ups, BUT at the same time they are getting housing for personal minimal outlay - in some cases the top ups are between £30- £40 a month as UC pay the rest.
As daft as it sounds having a tenant pay at least something towards the rent does make them appreciate what they have and as a result it is hoped they look after the place better.
Sometimes this works, sometimes it doesn't.

At the end of the day I try and keep rents as low as possible but I am not a charity!

Yes DSR you are correct a good tenant is a bonus. I normally hold rents 10% below MR for a good long term tenant which often equates to LHA plus £20-40pcm for mine.

It is difficult as the rents have been so volatile recently. In the North London suburbs where my flats are rents went right down during Covid and now have shot up to beyond what they were before. So I didn't raise rents for existing tenants during Covid but have raised them by around 3% now just to make my business viable. One new tenant who just moved in a year ago when rents were low made a big fuss when I wanted to raise it although it is still less than I was getting before. I guess he had not seen the benefit of my generosity over the preceding years when I never raised rents at all.
As stated above, being generous doesn't always go down well if we suddenly start to ask for market rents. Everything has gone up as we all know and shaving even more of our profits just makes the business not worth the risk.

Reply to the comment left by Dylan Morris at 23/05/2022 - 14:32
That's right. If HMRC says you can't deduct your finance costs there isn't any choice to mitigate that other than to raise rents.

If interest rates go up there isn't any choice other than to raise rents or sell (probably to someone who will raise rents if the property remains in the PRS).

If the government imposes an obligation to have an EICR which has a knock on effect of increasing your costs because it effectively allowed electricians to write blank cheques against your property there isn't any choice but to raise rents.

If the government said during a recent pandemic that tenants didn't have to pay but you received no compensation as a landlord when other small business owners did then your only option now to recover the cost is either to sell or raise rents.

Wouldn't it be more just, particularly for those of us who did hold rents down below market rent to encourage long term tenancies but got clobbered by costs that weren't imposed on the public rental sector if we were able to deduct our business costs? The truth is that the PRS depends upon finance and the government has presently stuck it between a rock and a hard place. The consequences won't be pretty if interest rates go up.

This is what I propose to put in my tenancy happy to here your thoughts

TERM : A fixed term of 12 months from ??/?? /?? thereafter month to month.After the initial 12 month period the rent payable will increase by the rate of the Consumer Price Index (CPI)

RENT : £...... per calendar month for the initial 12 months, to be increased by CPI after 12 months.

Reply to the comment left by chris at 24/05/2022 - 14:56
Chris
That is rather vague drafting. Better to say: "On the anniversary of this lease and every subsequent anniversary the rent will be increased by the same percentage as the Consumer Prices Index (CPI) (published by the Office for National Statistics) increases between March in the anniversary year and March in the preceding year."

Select another month if you want but you should choose a month two months before the date of the tenancy as there is a delay in publication. April's figures were published on 18 May.

Reply to the comment left by Ian Narbeth at 24/05/2022 - 16:02
Thanks Ian that makes sense

Surely whatever the final appropriate wording the essence of the clause should be the rent shall be an open market rent, or such other sum as agreed not least .... (Then refer to the CPI or RPI mentioned above).