Reasons for rent rise above normal this year?

by Readers Question

11:54 AM, 21st March 2019
About a month ago

Reasons for rent rise above normal this year?

Make Text Bigger
Reasons for rent rise above normal this year?

I am looking for help please with suggestions for best wording to explain a larger rent rise than normal for my tenants this year.

I have 2 properties, a house that I rent for £998 and a 2 bed flat for £650. Both are good tenants and cause no issues. I did have 8 properties, but have been selling them off when I saw the dark clouds coming.

I normally raise rents in line with RPI, but this year, with all the changes that have been enacted and those in the pipeline I feel that a larger increase will make the figures stack up better. Just wondered what others are doing.

I am not affected by selective licensing yet, but with the removal of the 10% wear and tear allowance and the removal of tax relief being phased in, also the ban on fees and talk of a necessity for an elec safety cert. Amongst other things.

All this raises costs and reduces yield so what is the alternative to raising rents over RPI to make this viable?

Many thanks

Alan



Comments

Rob Crawford

12:34 PM, 21st March 2019
About a month ago

Hi Alan, you don't mention how your current rents compare with others in the local area. You don't want to raise them above the market rate or you will likely loose your good tenants. Unless you are well below the current market rate already, I would put this on hold for now until agents increase their rates, an inevitable outcome with the tenant fee ban coming into effect in June. Landlords will then respond by instructing their agents to increase their rents. At that point increase yours. Assuming you have mortgagees and you are in the higher tax bracket, you can sight Section 24 of the finance act. If not then use a Consumer Price Index for Housing average calculation of annual changes since the last increase. I assume your tenants pay their own water/gas/elect/CTax, if not these need to be included. Use a section 13 with a simple covering letter to justify the increase. Also, check your AST, it may mention how any increase is to be calculated.

Mark Alexander

20:50 PM, 21st March 2019
About a month ago

Hi Alan

Your justification is what you have already said above, but you should equally heed the wise words of Rob Crawford too.

ahloughlin@gmail.com

7:38 AM, 22nd March 2019
About 4 weeks ago

Thanks guys. First renewal is August so general increases will kick in before.
I think I am at top end already of rents for the area so may have to compromise a little.

Whiteskifreak Surrey

9:22 AM, 22nd March 2019
About 4 weeks ago

When we increased rent back 2 year ago we have sent a letter to all our tenants pointing out Government's intervention in the PRS Sector, citing S24 , abolishment of W&T, increased burden of regulations etc. That went with S13 document properly filled in. We never used agents, so that was not a factor.
The next increase due to S24 is due on our properties, but we have excellent tenants and we do not want to lose them. So we will be waiting until Autumn to see how the market looks like after tenants' ban.
In any case we are planning to sell, after yesterday's NLA meeting we feel there is no future in the PRS sector.

ahloughlin@gmail.com

9:24 AM, 22nd March 2019
About 4 weeks ago

I agree. BTL is effectively dead

Pete Lindley

10:22 AM, 22nd March 2019
About 4 weeks ago

It's definitely swinging to a tenants market. The quality of your property has to be of a really good standard - decor, facilities, bills included etc etc, to gain high rents.
If you go cheap, you get cheap tenants, then run the risk of them trashing the place - but "it is their human right to trash it, the landlord can't kick them out just because of this"..... flippin' government!

James Nelson

10:32 AM, 22nd March 2019
About 4 weeks ago

I don’t think you need to justify any rent increase.

But I also think ‘a bird in the hand is worth two in the bush’ ...

Rob Crawford

11:31 AM, 22nd March 2019
About 4 weeks ago

Reply to the comment left by Whiteskifreak Surrey at 22/03/2019 - 09:22
Was this the advice of a presenter at the meeting or the NLA rep or exec from HQ or just a general feeling?

Mike D

16:31 PM, 22nd March 2019
About 4 weeks ago

Here is the email I sent to tenants, squarely telling them why, who to complain to and why is wasn't in my control.

Landlord Tax Draft Tenants Letter;

FORM 4

Landlord’s Notice proposing a new rent under an Assured Periodic Tenancy of premises situated in England.

Housing Act 1988 Section 13(2), as amended by the Regulatory Reform (Assured Periodic Tenancies) (Rent Increases) Order 2003

Dear Tenant,

As you may be aware from the news, there has been a change by the Government to increase taxation of rented properties (deemed as the ‘Tenant Tax’) in the Private Rented Sector which came into force from April 2017 and be introduce at 25% a year for next 4 years.

The taxation will be based on taxing ‘Turnover’ or Rental income instead of paying Tax on the Rent minus the costs/expenses of running the property ie: Mortgage costs, Insurance, Agent fees, ground rent etc.
This will have a very dramatic effect of any profitability that comes from the property that helps pay for ongoing improvements and repairs.

Here is your Current Property Monthly Costs; £475
After costs & Tax (40%) Remaining £123

Under the New Taxation this will change too;
Property Monthly Costs; £475
After costs & Taxation (40%) Remaining £-25

As a result of these changes, there will little money left-over or even a Loss, to be able to look after the long term refurbishment and maintenance of the Property, as a result it is very likely that rents will have to rise to help pay for the government taxation that has now been introduced.
I will be looking at what is required as a potential increase in order that it is still viable to run the property expenses, any large costs of repairs such as kitchens, bathrooms, boilers etc, or if this isn’t possible the only other course of action would be to sell the property.

I will keep you informed in the coming months as to what course of action will be required.

http://www.tenanttax.co.uk/videos

IF you would like to complain to your MP about this legislation called Section 24 of the finance act, then please email them here.

Sajid.javid.mp@parliment.uk

Your New Rent will increase as a result of this taxation initially to £495 per calendar month, but may also increase as year on year as the taxation is phased in over Four years from 2017 too 2020.

Again apologies for this action, but landlords are driven by government policies.

Regards


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

What on earth are you waiting for?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More