Raising the rent

[Anthony]

I have a tenant on a 6 month ast which is nearing an end. He has stated to me that he is very happy with the house and wants to stay for a good few years.

The rent is slightly below market but I want to keep my tenants happy and not be unfairly greedy so I have decided that the rent should only rise in line with inflation, on an annual basis. I will therefore be looking to raise the rent by 2-3% next summer. What is the best way to do this? Should I give him a new 6 month tenancy agreement to sign at the current rate and then another new one 6 months later at the new rate?

I have looked at my current agreement (a standard internet download from somwhere) and there seems to be no mention of changes in the rent.

Thanks in advance, Anthony

[Linda]

Hi Anthony,

I think it is commendable that you care about being viewed as a reasonable and fair Landlord. However, whilst this is a good quality you are also running a business and it is important to maximise your profit within the confines of the market rent rate. I find good tenants accept market rent levels. They are usually aware of the local rate as they 'shop around' for accomodation. Perhaps one of the reasons your tenant is so happy is he knows he's getting a bargain!!

Interest rates have just gone up and many Financiers believe another rise may be coming in November which means you should adjust your rent charge before next Summer.

Don't be hung up about contracts. What's important is you do the research first. Look at your total costs and the market rate of your local competitors and decide your new rent level, making sure you build in a profit margin of course. Then discuss the financial adjustment with your tenant regarding the signing for the NEXT 6 month agreement. Be open and frank and above all do not change your mind!! He will more likely agree to the new rate as he will see it as reasonable and fair.

P.S Why not look to creating a 12 month tenancy agreement with a 6 month break clause included? I'm assuming you want him to stay for a while and he says he has little intention of wanting to move out.

Good Luck

L

[Trenners]

Hi Anthony,

I totally disagree with Linda.

It is more important to maximise the amount of TIME that a property is rented (even at slightly below market rent) than it is to extract every last penny out of the poor tenant - thereby making them want to leave because the landlord is perceived as being greedy.

If you have a property priced at £800/month and it remains empty for 1 month whilst you look for a new tenant then you will generate £8,800 over the first year. If the same property is let at £750 per month for the full 12 months then you will generate £9,000 over the same time period.

Which just goes to show that greediness doesn't pay ..........

I would offer a 12 month extension at the current rent. Then, at the end of the 12 month period, I would increase the rent by inflation and offer another 12 month extension.

By approaching the increase in rent in this way you are going to have a happy tenant for 18 month and possibly 30 months WITHOUT ANY VOID PERIOD WHATSOEVER.

I have posted the "Ask the Landlord" column that I wrote about this very topic in the Swindon Advertiser this week.

Good Luck,

Mark

[Melboy]

I have just reduced the Rent on one of my properties because my excellent Tenant was wavering about with a (heaven forbid!) intention of buying a house. I couldn't afford to let Him go so I dropped the rent by £25 a Month and got him to sign up for a year's contract.

He's Happy.......I'm Happy.

Flexability is needed when setting rents.

[Linda]

Hi Anthony,

Looks like you have sparked a debate. I think what Trenners says in the method of increasing the rent over a period time is useful.

Just to throw cold water over the heated suggestion of greediness. You are not greedy if you adjust your rent level at the market rate. The method for doing so and the rate you set determines whether you have little consideration for the tenant.

The fear that increasing rent could directly result in a void period is a sad assumption. I have increase rents in line with inflation and never suffered void periods. Tenants accept the market rate. Though not wanting to be preachy, I understand there are others who have suffered and learn from their own experience. Or indeed those who have not but have this over-riding fear. There are many other factors which effects how long a property stays empty: level of local demand for accommodation, effective advertising, condition of the property but I won't bore you with the details!

Hope you found all the advice useful.

L

[evicthem]

Hi Anthony

This raises a number of issues, the first being that it is better to have a mention of rent increases in the tenancy agreement, saying on what period and basis the increase will take place i.e. annually by inflation. Secondly, if you give him a new tenancy agreement with a mention of the increase in, and show him the only change, I’m sure he would go along with that, but, you have just given him a further full six months,

(please don’t give him twelve!) whereas before you gave him the new agreement he was moving into a monthly periodic tenancy, which is a safer situation to have the tenant in if for some reason his good behaviour changes, as you can then issue a two month S21.

You have a number of choices, but the choice is yours, and if any one out there can think of further choices, I hope you respond.

1) Let his agreement default to a monthly periodic tenancy (if he pay monthly) and discuss with him about the increase that you would like to make in the summer, and determine which month it is and how much, and generally get his agreement, and decide from how the conversation goes whether you think it is safe to do it that way.

2) Or, to set it in stone give him a new six month agreement with the right extra wording bearing in mind all of the above,and you will be assuming here that he will remain a good tenant. I think that this would suit your conscience better, make it more legal, and would rectify what should have been written in the agreement in the first place, and will be crystal clear to him as to what is expected of him in the summer.

Don’t give any more fixed period than you have to. The default periodic tenancy is where you should be seeking to be in my view.

I always in explaining the agreement to a new tenant, tell them that it will increase annually with inflation, show it him this in the agreement before he signs, he signs on that basis. There’s no surprises. wa la.

Ed