Raising the rent – how the interest rate rising could cost tenants

It may have only been a quarter of one percent, but the Bank of England’s recent interest rate rise could have a lasting trickle-down effect for landlords and tenants. Rents are at their highest in years and there is a shortage of affordable private and council/housing association rental properties.

Hitting renters harder

On average, the monthly cost to rent a two or three-bedroom house is around £1,100. Some areas are considerably cheaper, and others, such as London and the South East, can be up to £700 a month more. So any raise in interest rates will inevitably trickle through to a rent increase that could put the private rental market as far out of reach as owning your own home.

Landlords have also been hit with a raft of regulations and conformity requirements, as well as tax relief reductions, and considerable increases in the stamp duty on buy-to-let property purchases. All of this creates a perfect storm for landlords, which often means tenants end up paying – quite literally.

If you’ve had a letter from your landlord and the rent increase seems excessive, what can you do? If your tenant refuses to pay the increase, what are your rights as a landlord?

Tenants’ rights

Your landlord’s ability to increase the rent will depend on what type of agreement you have. If you have what is referred to as a periodic tenancy or rolling agreement, then your landlord cannot increase more than once a year without your agreement. If you have a fixed-term tenancy then again, the rent can only be increased if you agree. If you don’t agree with the rise then the rent has to stay at the set rate until the fixed term ends. Once that point is reached then the landlord can increase the rent, usually to stay in line with inflation.

Any rental increase must be fair and realistic, so a good way to check that you’re being treated reasonably by your landlord is to find out the average local rental value for like-for-like properties. This will give you a baseline to work from, and negotiate a fair rise with your landlord. Your landlord must also give you at least a month’s notice of any increase. If your tenancy is a fixed yearly agreement, then that notice period increases to six months.

Going to a rent tribunal

If you feel the increase is unreasonable or even unlawful, then you can challenge it at a rent tribunal. However, you can only go to tribunal if:

  • Your tenancy agreement is an assured or assured shorthold
  • Your rent increase is a part of the procedure order s.13 of Housing Act 1988
  • You apply to go to tribunal before the new rent increase takes effect.

Landlords

It’s important to remember that tenants have rights too, and that you cannot simply implement an excessive rent increase. If the increase could be perceived as a way of forcing a tenant to vacate then you could be subject to legal action by the tenant.

However, landlords are protected by the law too. If a tenant refuses to accept a rent increase then you may be able to take the dispute to an arbitrator or first-tier tribunal. If your agreement is a fixed term tenancy then you may also be able to issue a Section 13(2) Notice of the Housing Act 1988, which will propose an increase at the end of the fixed term and before a new agreement is signed.

If there is a clause in your tenancy agreement that states that rent rates can be reviewed after a certain period into the tenancy then you must make sure that the clause is fair and complies with the Unfair Terms in Consumer Contracts Regulations 1999.

If a tenant flatly refuses to pay any rent, then you may have grounds to start proceedings to have them evicted from the property.

To discuss any landlord or tenant legal matters email Paul Reader or call on 01892 526 344