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Raising the Rent

3.6 Raising the Rent

There are three ways to review the rent in an assured shorthold tenancy:

• by way of a rent review clause in the tenancy agreement;
• by agreement with the tenant;
• by notice under section 13 of the Housing Act 1988 after the
end of the fixed term or for an existing periodic tenancy.

Rent review clauses in the tenancy agreement

Normally, it is not possible to review the rent during the fixed term of the
tenancy unless either there is a valid rent review clause, or the tenant
agrees to the review. If the tenant agrees, this should be recorded (perhaps
by seeking the tenant’s signature of a new tenancy agreement). Any rent
review clause which forms part of the landlord’s standard terms must
comply with the provisions of the Unfair Terms in Consumer Contracts
Regulations and be fair. Standard clauses allowing the landlord to review
(and particularly to increase) the rent as he sees fit are likely to be
unenforceable.

Any increase upon a valid rent review is more likely to be enforceable if                 it can be justified by a recognised/ established factor (such as significant
improvements to the property or general cost increases reflected in the
Retail Prices Index). When a fixed term assured shorthold tenancy expires
- which includes a rent increase clause - it does not carry over when the
tenancy becomes a statutory periodic tenancy’. Rent reviews for the
statutory periodic tenancy will need to be either by agreement with the
tenant, or using the procedure in section 13 of the Housing Act 1988, which
requires a prescribed form of notice.

Rent increase by agreement

It is also possible to review the rent by seeking the tenant’s signature to
a document (such as a copy letter to the tenant proposing the new rent)
which confirms agreement. Landlords wishing to do this are encouraged to
speak to the tenant first to gauge whether or not they are content with the
proposed new rent.

Once agreement has been reached, the landlord should send a formal
duplicate letter proposing the new rent and asking the tenant to sign, date
and return one copy to confirm their agreement. If the tenant fails to return
the letter or fails to pay the new rent, then the rent will not have been
validly reviewed. The review will be less susceptible to challenge if the
landlord gives the tenant something in exchange for any increase in rent –
for instance allowing the tenant to stay longer than would otherwise be the
case, or improving the facilities or condition of the property. If this is to be
the case, it should be recorded in a letter from the landlord to the tenant.

It is not possible to increase the rent unilaterally by simply sending a letter
to the tenant telling them that their rent will be increased from a specific
date. If the tenant agrees to this and starts paying the rent the increase
is agreed but if the tenant does not agree they can to refuse to pay the
increase.

Rent increase by notice under section 13 of the Housing Act 1988

If the tenancy is an assured or assured shorthold tenancy the landlord can
use a formal procedure in section 13 of the Housing Act 1988 to propose a
rent increase. To do this a special form is needed, which is obtainable from
law stationers, some landlord associations, and some of the online services
for landlords on the internet.

The form must be completed in full, and served on the tenant. The current
version of the form was issued in 2003 and has 17 notes attached to it for
guidance. The notes are a part of the Prescribed Form and if they are not
issued to the tenant a rent proposal may be struck out by the RPTS. It is
advisable for a landlord to obtain professional advice before using the form
for the first time. At least one month’s notice must be given to the tenant. If
the tenant does nothing during this period, then the rent increase will take
effect.

It should be noted that the rent can only be increased by Section 13 after
the fixed term has ended, and that this facility can only be used once every
12 months.

If the tenant feels the rent increase is too high then they can refer it to the
Rent Assessment Committee for review. The application must be made
no later than the last day of the notice period or it will be invalid and
the increased rent will stand. If the rent is challenged the matter will be considered by the Rent Assessment Committee who, if they consider the
rent is not a market rent, will substitute what they consider is a market
rent. This Rent Assessments Committee’s view is not always in the tenant’s
favour and it is not unknown for them to consider that the proposed rent
may be too low.

3.6.1 Rent Act (Regulated) Tenancies

Regulated tenancies are tenancies governed by the provisions of the Rent
Act 1977. They will all have been created prior to 15th January 1989.

The Rent Act provides for the tenant (or the landlord) to apply to have a
‘fair rent’ registered for the property and once this has been done the fair
rent is the only rent the landlord can charge.

These are rents fixed by the local office of the Rent Service.

The Rent Service does not take account of the impact of scarcity on the
market value of rented accommodation. Contact details for the local Rent
Service can be obtained from the Council’s Housing Advice Service or the
Valuation Office Agency website: www.voa.gov.uk/fair_rent/index.htm.

If a fair rent has been registered, a new registration cannot be made less
than two years after the date the existing registration came into effect
unless:

• landlord and tenant apply jointly. or

• there has been a change of circumstances, for example, major
repairs, improvements or changes in the terms of the tenancy.

It is in the landlord’s interest to apply promptly for rent increases every
two years otherwise the rent charged might fall behind market rents
because the amount of increase is capped under a complicated calculation
set out under regulations - The Rent Acts (Maximum Fair Rent) Order 1999.

In the unlikely event that the rent has not already been registered a
landlord can increase the rent if the tenancy agreement or contract allows
for rent increases. If the agreement does not allow for increases in rent it
can only be increased if:

• the landlord and tenant make a formal rent agreement which
must follow special rules; or

• the Rent Officer registers a fair rent.