With so much talk in the media of rising rents (certainly in London and the southeast) you wouldn’t be alone if you were itching to ask your tenants for an increase, but you need to be wary of appearing too greedy, which might drive decent tenants away.
Before you do anything, look at asking prices of similar properties in your area on rental sites like Rightmove and Zoopla to make sure that rents really have risen. Despite what you might have heard in the press, rents haven’t gone up across the board, even in London.
If you’re sure your property is worth more than you’re getting, then write to your tenant to suggest an increase, but make sure you do this at an appropriate time.
If they’re on a fixed-term contract without a break-clause, you’ll have to wait until that contract comes to an end before you can increase the rent. This rule applies even if you’ve recently improved the property, such as installing a new bathroom or replacing old furniture.
You should write to the tenant a couple of months before the end of their contact offering to renew the tenancy but at a higher price.
Where there is a break clause in the contract, you can increase the rent at the point of the break, but only with the tenant’s agreement and this can’t be within the first six months of the lease.
If you have a periodic tenancy (which rolls on week by week or month by month), you can increase the rent at any time as long as you give the tenant a months’ notice. You can only raise the rent once every 12 months unless the tenant agrees to further increases.
Of course, if you want to raise the rent more than once a year and the tenant doesn’t agree, you have the option of ending the tenancy with two months’ notice and then you can look for new tenants at a higher rent.
However, you need to weigh up whether the extra income you might earn is worth the extra cost and hassle of finding a new tenant. Even if you market your property yourself, you’ll still have advertising costs and you might have to pay for a new inventory, check-in and check-out reports and a new tenancy agreement.
You’ll also have to give up some of your time to arrange viewings, sorting out the paperwork and settling in the new tenants. Is it really worth it? Some landlords prefer to forego any increase and use this as a tactic to persuade tenants to stay.
However, other landlords take the view that at a time when rents are rising it’s better to increase their rent by a small amount each time they renew a tenant’s contract as this is much easier for them to swallow than a whopping great increase every few years. If you can demonstrate to tenants that the rent increase is reasonable and in line with other rents in the area, they should find it acceptable, but if you don’t want to lose them you should be prepared to negotiate, at least a little.