by Ed Firmin
Posted on Thursday, October 15th, 2015 at 10:00
There will possibly be an occasion throughout your time as a landlord when you need to consider a rent increase.
It’s probably one of the worst parts of your role as a landlord. It’s not a nice conversation to have, you might think that it’ll cause your tenants to leave, it might even cause future issues for your relationship; you may even think that they’ll care less about the property because they’ve been forced to pay more, and so won’t look after it as much as they would have done previously.
So think carefully before deciding whether a rent increase is worth it, because it could do you more damage than the extra money brings in. So there really needs to be a valid reason for it. That could include a rise in mortgage repayments, rise in taxes, rise in market value of the property or an increase in the amount of maintenance needed on the property, for example.
You should review the tenancy agreement to see if you are actually able to implement a rent increase. If it’s a fixed-term agreement, then you wont be able to, unless there is a clause in there that gives you permission to review the rent. But just be careful to ensure that the clause included in the agreement is fair and compliant.
The increase shouldn’t be astronomical but fair, otherwise the tenant will have grounds to challenge you. You also need to ensure that you are giving them a proper notice period before the increase is implemented, I would suggest that two or three months is fair.
Be prepared to justify the rent increase with your tenant, as you can imagine if it was the other way round, you probably wouldn’t lie back and accept it with no questions asked. So have this information prepared, the more open you are with your tenant, the more understanding they will be. Then you should reassure them that this is a one-off, that there aren’t going to be any more increases during the fixed-term agreement/for the next 2 years etc. so that they know that isn’t going to be the first of many.
Think about the wider conditions in the market. If rental conditions are higher elsewhere, you can explain this to your tenant, so they understand you are getting a good bargain. If they do leave as a result, then you know that you can charge a higher amount for your next tenants.
They do have the right to refuse a rent increase, so be prepared for this too. You do need each other, so if you approach the process in an understanding and open way, then you are more likely to come out of it unscathed.
If you would like some advice on how to manage a rent increase with your tenants, then please get in touch with me here.