Rent Increases and the Section 13 Notice
With all Assured Shorthold Tenancies landlords can increase the rent after the initial fixed period if it is stated in the tenancy agreement or if the tenant agrees to the increase. There may be a rent increase clause in the tenancy agreement which would have been agreed and signed at the start of the tenancy.
However, if the increase is not stated in the agreement and the tenants dispute the increase then the landlords are required to follow certain procedures if they wish to increase the rent on the property.
The Housing Act 1988 makes it possible for landlords to increase the rent after the initial fixed term by issuing the tenant with a section 13 notice. Download one here
Rent increases may be stated in the tenancy agreement, so the tenant would have been made aware of the rent increase in advance by the landlord. If there is no mention of a rent increase in the agreement and the tenant is unwilling to mutually agree the increase then the landlord may issue a section 13 notice.
If a landlord does not follow the correct procedure and give the tenant notice of the increase then the tenant can continue paying the set amount of rent. However, if a tenant disputes the increase this could lead to them being evicted if the initial fixed period has ended.
Landlords often increase the rent when they renew a tenancy agreement, as this makes it easier for them to evict a tenant if they disagree with the new rent terms. At the start of a new fixed term agreement any rent increase should be agreed by both landlord and tenant. The tenant will then be renting through a fixed tenancy agreement.
After the initial fixed period has ended, if the landlord and tenant do not sign another agreement, but the tenant is allowed to stay and continue paying rent on a monthly, fortnightly or weekly basis then the tenant is renting through a periodic tenancy agreement.
Notice required before an increase
A landlord is required to give the tenant sufficient notice before a rent increase is to take effect.
For a monthly, weekly or fortnightly tenancy one month’s notice of the intended increase is required. For a yearly tenancy, a period of six months' notice is required before the increase can be put into effect.
The date on which the new rent is required must not be earlier than a year after the date when the rent was last increased using a section 13 notice. If a new tenancy is in place then the date should not be any earlier than a year after the date when the tenancy started.
The rent increase must begin on the same day of the month that the tenancy started, not another day of the month. For example, if the rent for the tenancy is due on the 28th of every month then the new increased rent should also be due on the 28th of the month.
You can download a Section 13 Notice HERE
Fixed Term Tenancies
Assured Shorthold Tenancies enable the landlord to charge a higher rent after the initial fixed period, which is usually six or twelve months. The rent cannot be increased during the first fixed term.
A landlord can increase the rent if they wish to after the initial fixed period, providing:
- The tenancy agreement contains information on the procedure for a rent increase
- The landlord gives the tenant the required notice of the intended rent increase
- The landlord provides the tenant with written notice that a change will be made to the terms of the tenancy agreement
Landlords are unable to increase the rent before the end of the initial fixed period unless this is stated in the tenancy agreement, or both the tenant and landlord agree to the increase in rent.
If the fixed term of a tenancy has ended and no new agreement has been signed, then the tenancy automatically becomes a periodic tenancy.
If the tenancy agreement does not provide information on a rent increase, then the landlord can only increase the rent if either :
- the tenant and landlord agree, or
- a section 13 notice is issued.
There is no limit on the rent increase a landlord can propose with periodic tenancies.
Periodic tenancies make it more difficult for a tenant to oppose rent increases as they have little protection from eviction. The landlord has the right to decide to evict the tenant using the correct procedure rather then accept lower rental payments.
Section 13 Notice
The Housing Act 1988 makes it a requirement for a landlord to issue the tenant with a Section 13 notice if the increase in rent is not stated in the tenancy agreement and the tenant refuses to agree to the increased rent proposed.
The form giving notice of an increase in rent is required to be completed by the landlord. The form contains information on the rent increase and the starting date for the new rent proposed. It guidance notes for both landlord and tenant and is quite straightforward to complete.
If a landlord decides to increase the rent but does not issue a Section 13 notice then the tenant is not obliged to pay the increase in rent, unless stated in the tenancy agreement. If a landlord later tries to gain possession based on unpaid rent arrears due to the increase, then the rent increases may not be accepted by the courts. There would not then be a possession order based on rent arrears and the possession order may be refused.
In some cases the landlord may prefer to issue the tenant with a Section 13 notice, but more often than not they would rather end the tenancy, if a tenant refuses to agree to the rent increase.
Rent Assessment Committee
If a tenant thinks that the rent charged on the property is excessively high then they can refer the rent to the Rent Assessment Committee. However, after the initial fixed term period, and once the tenant has signed a new agreement, they will no longer be able to refer the rent to the committee.
The committee will sometimes visit the property and conduct an external and internal assessment, to enable them to decide on a fixed rent, if they feel this is necessary or they have been requested to do so by one of the parties.
Referring high rents to the Rent Assessment Committee can in some cases result in the rent being increased, if other similar properties in the area have higher rental charges. Alternatively, the committee may agree that the rent is too high and issue the landlord with a market rent value for the property. If the committee feel that the rent charged is reasonable it may remain at the current rate.
Landlords are entitled to charge a full market rent. The market rent which can be charged depends on the availability and rent charged for similar properties in the area. Market rent is the highest amount of rent the landlord can legally charge for a particular property.
Once the Rent Assessment Committee receives an application to review the rent on a property, both the landlord and tenant are informed and given the option to apply in writing or ask for an oral hearing. If the Rent Assessment Committee holds a hearing, then both parties will be given sufficient notice and be able to have a barrister, solicitor or housing advisor present to represent them. During the hearing, both parties will have the opportunity to represent themselves through giving evidence, drawing on witnesses and questioning the other party. The documents used as evidence during the hearing should be issued to both the landlord and tenant.
Following a hearing by the Rent Assessment Committee, the landlord and tenant will be informed in writing of the decision and the proposed rent, along with a summary of the reasons for the decision. If the tenant or landlord would like more detailed reasons on the decision they can request this within twenty one days of receiving the summary. The full reasons for the decision will then be issued by the Rent Assessment Committee within twenty eight days of the request being made.
The landlord is only then able to increase the rent after one year of the Rent Assessment Committee making their decision.
If a tenant refers a new rent to the Rent Assessment Committee, the application must be received not later than the one day before the new rent is payable. If the committee receives the application after this date the application will not be accepted, and the new rent which the landlord has decided will be payable by the tenant.
A tenant may decide to discuss the rent increase and see if it is possible for the landlord to increase the rent gradually over a certain length of time. In some cases a landlord may prefer this to the option of finding new tenants.
Assured Shorthold Tenants have very little protection from eviction. Tenants can be evicted after the initial fixed period without a legal reason, providing the landlord gives them two months' notice. Therefore Assured Shorthold Tenants often have little choice but to accept rent increases if they wish to remain in the property.
A landlord may issue a section 21 notice at any time during the tenancy, whether it is a periodic tenancy or a fixed term tenancy. However, if a landlord wishes to regain possession before the end of the fixed term, this is only possible if the landlord is able to show that certain conditions have been met. This would then require the landlord to firstly issue the tenant with a section 8 notice to quit.
The landlord may use the most common ground for section 8 notices which is rent arrears. However, depending on whether the landlord has followed the correct procedures to increase the rent, the grounds for possession may or may not be accepted by the courts.