This is a fairly new urban myth, but several people have asked me this during the past year. So time for a bit of clarification.
In a way, it is true. If you are increasing rent via the statutory notice procedure, this is only available to you once a year.
The Statutory Notice Procedure
The statutory notice procedure is the procedure under section 13 of the Housing Act 1988. It is available to landlords of assured and assured shorthold tenancies.
The landlord must use the government’s prescribed form, Form 4, and give one month’s notice. If the tenant does nothing, then the new rent will take effect at the end of the notice period.
However, if the tenant refers the rent to the First Tier Tribunal, then the Tribunal will investigate. Depending on their findings they can either increase or decrease the rent. Their object is to set the rent at the market rent for that type of property in that area.
However, the statutory notice procedure is not the only way to increase rent. And it is also only available to assured and assured shorthold tenants during a periodic tenancy.
So what are the other methods of increasing rent?
Other ways to increase rent:
Agreement
You can always increase, or decrease, rent if all parties agree to this. In fact, this is the most common way to increase the rent. It is normally done by the tenant signing a new tenancy agreement, or renewal form, granting tenants a new fixed term at the end of the existing fixed term.
Rent Review Clauses
This is where your tenancy agreement contains a procedure to increase the rent during the fixed term of a tenancy. If there is no rent review clause, then rent cannot be increased until after the fixed term ends.
They usually provide for rent to be increased once a year, but not necessarily. It depends on what the clause actually says.
To use a rent review clause, you have to read the clause and do what it says. If you don’t follow it precisely your rent increase may be ineffective and unenforceable.
Generally, rent review clauses are used to increase rent during the fixed term. The statutory notice procedure being used if the tenancy then becomes periodic. Assuming it is an assured or assured shorthold tenancy.
Note that if your tenant is a common law, unregulated tenancy, a rent review clause may be the only rent increase procedure available to you. For example, if your tenant refuses to sign a new tenancy agreement.
Protected tenants under the Rent Act 1977
Most of these will have a ‘fair rent’ registered. Meaning that rent can only be reviewed and increased once every 2 years.
But there are only few Rent Act tenancies now as none have been created since January 1989.
Looking to the future
It is likely that when the Renters Reform Bill is finally published, rent increases will be limited to once per year. However, at the time of writing, we have not seen the bill yet.
And if it is not published soon, it is likely that it may not become law before the next General Election (expected in early 2024). After which it could be changed, depending on the policies of the new government.
And finally
Although it is not an absolute rule, generally, if rent is increased, it tends to be on an annual basis. Using one of the procedures described above.
However, in many cases, landlords tend not to increase rent at all for existing tenants. This can cause problems for them. Particularly now (April 2023) when we have a cost of living crisis and landlords’ expenses are increasing fast.
Because of these increasing costs, many landlords are being forced to increase rents today far more than they would have, had they done modest annual rent increases in the past. Leading to major problems for their tenants, unable to afford such large rent increases at one time.
Whereas if the increases had been spread over a period of time, it would have been less of a struggle for them.
So although there is no general rule saying that you can only increase rent once a year, actually modest rent increases once a year are generally a good idea.
A related myth is that there is some sort of percentage limit on section 13 rent increases.
There are many tenants who haven’t had a rent increase for several years because the landlord hasn’t felt the need whilst rent/mortgages have been stable. These arrangements are being re-assessed now and tenants are seeing very large increases between the rent as it was when the tenancy was first agreed and the rent now.
It is often assumed that there must be some upper limit on how much the rent can increase in one go, but there isn’t and it would only need to be shown to be the ‘market rent’.
You’ve forgotten to mention the now very common method of increasing the rent – the nasty, aggressive, bullying way so often used by agents, not even necessarily at the instigation or knowledge of the actual landlord, that completely denies the tenant the ability to refer the increase to a tribunal.
What happens is that about a little over two months before the end of a fixed term contract the agent writes to the tenant “inviting” them to sign a new contract at a substantially higher rent if they wish to continue living in the property and basically saying “If you do not sign and return the new agreement asap…” (usually only a few days is given) “…you will be issued with a Section 21 and will be required to vacate and return keys on or before the expiry date of your contract”.
Stupidly the rules of the First Tier Tribunal only seem to allow them to review the very first contract signed when a new tenant moves into a property and thereafter only rent increases issued on a Section 13 notice, thus the tenant is effectively blackmailed into accepting an unreasonable increase that the FTT would never have allowed if only someone had had the sense to foresee such abuses and given them the power to intervene on all rent increases however demanded or requested.