Rental income is the main source of revenue for landlords, and it’s vital to review your rental prices regularly. Increasing your rental prices is a necessary step to maintain your property’s value and ensure your rental income keeps up with inflation, though it can be challenging to communicate a rental increase to your tenants.

There are also various factors to consider before raising the rent, including legal compliance, market conditions, and tenant objections. In this blog, we’ll provide you with some expert advice on how to increase the rent at renewal and what you need to know to stay compliant with the law, maintain a positive relationship with your tenants, and increase your rental income.

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How to be compliant when serving notice for a rent increase

Before increasing the rent, it’s essential to understand the current legislation around rental increases. In England, landlords can only increase rent once a year (unless it has not been mutually agreed with the tenant), and they must provide a minimum of six months’ notice to their tenants for a yearly tenancy, or one month’s notice if the rent is paid weekly or monthly.

The legal limits to amount rent can increase depend on a few different factors, including the type of tenancy and the location of the property. Here are some key points to keep in mind:

1. Assured Shorthold Tenancies (ASTs): For ASTs in England, Wales, and Scotland, there are no specific rules about how much landlords can increase rent. However, landlords must give tenants at least one month’s notice before any increase takes effect. In addition, if a tenant disputes the increase, they can refer the matter to a tribunal for review.
2. Rent Pressure Zones (RPZs): In certain areas of Scotland, known as Rent Pressure Zones, there are restrictions on how much rent landlords can charge. These restrictions apply to all private residential tenancies, including ASTs. The maximum increase is capped at the Retail Price Index (RPI) plus 1%, up to a maximum of 4%. The Scottish government website provides more information about RPZs
3. Local Housing Allowance (LHA): If a tenant receives housing benefit or Universal Credit to help pay their rent, the amount they receive may be affected by rent increases. This is because housing benefit is usually calculated based on the Local Housing Allowance (LHA) rate for the area. If a landlord increases rent above the LHA rate, the tenant may have to make up the difference themselves. The UK government website provides more information about LHA rates.
4. Longer tenancies: In England and Wales, landlords can offer longer tenancies of up to 3 years to tenants. In these cases, landlords can only increase the rent once a year if the tenant agrees, and must give tenants at least 6 months’ notice of any increase. The UK government website provides more information about longer tenancies.

Assess your market

When considering raising the rent, it’s essential to research current rental rates in your area to understand the market conditions. You can use various online tools to compare prices and determine the average rental prices in your location. Moreover, you need to consider factors such as the condition and location of your property, local amenities, and your target tenant. Understanding your market can help you set a fair and competitive rental price.

Communicating with your tenant

Communication is critical when raising the rent at renewal. You need to approach the conversation carefully, especially if you want to maintain a positive relationship with your tenants. You can use various strategies to communicate the rental increase, such as sending a letter or email, or having a face-to-face conversation. Additionally, you need to provide your tenants with ample notice and explain the reasons for the rent increase. Be open to negotiating with your tenant if they have any objections, but don’t compromise your profitability.

Timing is everything

Timing is critical when raising the rent. The best time to increase rent is when the rental market is booming and there is a high demand for properties. However, you need to avoid raising rent too frequently or at a time that could coincide with the lease’s expiration. A rental increase can be a deal-breaker for tenants at the end of their lease, so you need to time it appropriately to avoid losing your tenants.

Alternative options

Raising the rent is not the only option to increase your rental income. Offering lease extensions without increasing the rent can be an attractive option for your tenants, especially if they are happy with their current rental price, and greatly reduces the risk of the tenant leaving and creating a void period.

Additionally, providing perks and upgrades, such as access to a gym or additional parking, can be a way to add value to your property and keep your tenants happy. Exploring other revenue streams, such as short-term rentals, can also be a viable option for some landlords.

Dealing with tenant objections

It’s common for tenants to object to a rental increase, and it’s important to handle these objections professionally. You can anticipate some common tenant objections such as affordability, lack of notice, or feeling undervalued. A good strategy is to listen and address these objections while negotiating the rent increase. A positive relationship with your tenant is crucial to prevent any disputes that could escalate into legal issues.

Conclusion

Increasing the rent at renewal can be challenging, but it’s essential for the profitability of your property. Knowing your rights, dealing with tenant objections, communicating with your tenant, and timing are all essential components of a successful rental increase. It’s also best to try and explore alternative options before increasing the rent. 

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