Whilst in the past it was largely down to a landlord or a letting agent to decide how much to charge for rent, the Renters’ Rights Act has made it so that rent increases can only be made once per year and can be challenged by tenants.
This challenge system, overseen by the First-tier Tribunal, is designed to enforce the Act’s statement that rent increases can only rise up to the “market rate”, and will determine what that means in situations where it is difficult or impossible to calculate.
It is essential to be analytical and careful when applying for rent increases; Propertymark has analysed several decisions where a proposed increase was not only reduced but led to a rate cut.
In one particular case in Manchester, a proposed £50 rent increase became a £200 rent reduction, despite being considered attractive accommodation and lacking any issues that required maintenance.
This has led to questions about how landlords should go about applying for a rent increase, but here are some important early conclusions that will shape your rent increase strategy going forward.
Justify Your Existing Rent Before Proposing Increases
Following the Manchester case, in particular, landlords should start by analysing the current market value of their property to ensure that it reflects current market value and that your evidence for an increase is strong enough.
As the tribunal proved, hedging your bets by proposing a small increase could still lead to a costly challenge.
A tribunal will focus on the market rate of the property rather than your proposed rent, meaning that if you ask for less than the property is worth, the tribunal may award you more in the event of a challenge.
Focus On Agreed Rents Rather Than Advertised Rents
The market rate is primarily shaped by what people are actually paying for similar properties in a similar area rather than the rent proposals that have been advertised.
Whilst advertised rents can be useful as part of a tribunal, the behaviour of renters in the area will shape which price takes priority.
Makes Sure Valuations Are Clearly Supported With Evidence
A tribunal will assess any evidence that proves the market rate value of a particular rental property, including size, floor area, bathrooms, condition, furnishings, layout and any added value features such as paid-for utilities or cleaning services.
The tribunal will look beyond the traditional estate agent shorthand of bedrooms and bathrooms and will instead focus on overall living space and how a rental property actually works as a home.
A potentially landmark case in London found that a two-bedroom flat which lacked a lounge was treated by the tribunal as a small one-bedroom flat, which led to a proposed £550 increase being reduced to £202.50.
Make Sure Serious Issues Are Rectified Even If You Did Not Cause Them
A further case in Leeds also highlighted that serious defects and issues need to be rectified, even if you were not the primary cause of them.
The property in question would have been worth £1000 a month in rent according to the tribunal, were it in full working order. This was £50 more than was requested by the landlord.
However, issues with drainage meant that this was reduced to £925 per month, a £30 rent increase.
