New rent increase rules could affect landlord income warns letting agency

A letting agency has warned of challenges under new rent increase rules, which will affect landlord income.

Under the Renters’ Rights Bill, landlords will only be able to raise rent once every 12 months using a Section 13 notice and must give two months’ notice before an increase.

Leaders Roman Group (LRG) says that rent review clauses in tenancy agreements will no longer be enforceable, meaning landlords will need to adjust how they approach rent increases.

Changes will require a shift in how landlords approach rent increases

Currently, landlords can increase rent through a rent review clause in the tenancy agreement, by mutual agreement with the tenant, or by serving a Section 13 notice (currently Form 4) once every 12 months, giving two months’ notice.

However, under the Renters’ Rights Bill, only the Section 13 route will remain valid. This will become the only legal way to raise rent, regardless of what the tenancy agreement says.

The government has voted through an amendment giving the Secretary of State powers to amend the Section 13 rent increase rules in the future if a backlog of cases builds up in the courts.

Allison Thompson, national lettings managing director, Leaders, points out all rent increases must reflect current market rates and tenants will be able to challenge rent increases.

She said: “These changes will require a shift in how landlords approach rent increases. Rent review clauses in tenancy agreements will no longer be enforceable, and informal agreements will not be valid without a formal Section 13 notice.

“Landlords will need to plan rent increases carefully, especially in rising markets where waiting 12 months to adjust rent may affect profitability. It will also become more important to gather clear evidence of comparable market rents, in case a tenant challenges the increase.”

The Tribunal process will also become less risky for tenants

If a tenant does challenge a rent increase it will be taken to the First-Tier Tribunal where the Tribunal cannot raise the rent above the amount proposed by the landlord.

Ms Thompson also explains the Tribunal can defer an increase.

She said: “The Tribunal process will also become less risky for tenants. If they dispute an increase, the rent will no longer be backdated, and it cannot be raised above the figure proposed by the landlord.

Tenants will also be able to request that an increase is postponed for up to two months if they are experiencing financial difficulty.”

However, she warns for landlords: “This means longer lead times and potentially delayed income increases, even where the rent remains below local market averages.”

How landlords can manage rent increases

LRG have created a list on how landlords can take steps to manage rent increases before the Renters’ Rights Bill becomes law.

How landlords can prepare

• Remove any rent review clauses from tenancy agreements
• Keep detailed records of when rent was last increased
• Always use the most recent legal version of the Section 13 notice
• Monitor local rental trends and plan any increases well in advance

To reduce the risk of a dispute:

• Discuss rent increases with tenants before issuing a notice
• Provide comparable market data to support the new rent
• Work with a qualified letting agent who understands both the market and the legal framework

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