Managing Rent Increases Fairly

In my view, rent for tenants should be increased annually but kept below prevailing market levels.  Most landlords see the sense in that approach. Your tenants will likely remain in place, and you will avoid the hassle and risks associated with finding new ones.

Let’s not bother dissecting the current rules on rent increases or speculating on what might replace them in the future.  It is possible to increase rent on incumbent tenants under the current rules.

There is a balance, however.  If you push rents up too quickly, you’ll drive good tenants away.  On the other hand, there are risks with not increasing rent over a long period.  If you’re one of those landlords who never increases rent when you’ve found a good tenant, let me relate a story which I’ve seen playing out a few times.

After several years without any rent increase, you can end up in a situation where your tenant will refuse to leave should you have a genuine reason to ask them to.  The prospect of finding an equivalent property and paying substantially more rent can become unpalatable to them.

In a recent case which I’m aware of, a landlord hadn’t increased the rent for 11 years.  When they decided to sell due to cashflow issues, their tenant decided they were not for moving.  After serving notice and waiting for an eviction process to hear, the tribunal ruled that the tenants could stay.

The situation remains stressful and intractable for the landlord.  They could sell with their tenant in place, but because they are paying about half the market rent, any buyer would expect a considerable discount on the price.  It’s worth pointing out that the landlord had a managing agent in place, but there had never been any discussion of rent increases.

The legal framework is complex and human behaviour is more complex still.  The point of this story is that it is not simple to find the perfect balance as a landlord.  The value of good advice from a knowledgeable and experienced agent cannot be over-stated.