What is a Reasonable Rent Increase in Central London? 

How much is a fair rent increase is a tricky problem for London landlords. With interest rates and the cost of living high, plus increased demand for good rental properties, it might be tempting to increase the monthly rent on your property to boost your income and maximise your investment.

Raising the rent is, however, a careful balancing act. You need to make sure that any increase is fair, reasonable and within the law. In many cases tenants have the right to challenge an increase, which could sour relations and potentially lose you a good tenant.

To help you make sense of the rules, we look at when, why and how to increase the rent on your property. We look at how much is too much and what else you need to think about, particularly in view of the Renters Reform Bill which is currently making its way through parliament.

Why choose to raise the rent?

As a landlord, you are both providing a service and running a business. Like businesses in all sectors of the economy it is reasonable for you to adjust rents to bring them in line with market rates in your area and factors such as inflation and rising wages. If you’re funding the rental property with a buy-to-let mortgage, you may have seen an increase in your own costs as interest rates have risen.

For these reasons, many landlords build rent increases into their future planning by including them as a clause in the tenancy agreement – so tenants know when and by how much their rents are likely to rise.

When can you consider a rent increase?

Legally there are times when you can – and can’t increase the rent. For example, you can’t increase the rent during a fixed-term tenancy unless your tenant agrees. If they don’t agree, you need to wait until the end of the fixed-term period. For rolling, or periodic tenancies, the landlord can’t increase the rent more than once a year without the tenant’s agreement.

How much is a reasonable increase?

There is no legal restriction on how much you can increase the rent. To work out whether your proposed rise is reasonable, look at property websites to see what other rental homes like yours are charging in your area and whether the new rent would be comparable.

Look at the wage inflation rate – check Office for National Statistics (ONS) data – as an increase in line with this would be reasonable. Check other indices too – the consumer price index (CPI) and the retail price index (RPI) when considering how much is fair. It’s also worth noting that in the social housing sector rent increases are capped at 7.7%.

What is the process for raising the rent?

There are three main ways to increase rents in England:

1 Through a rent review clause

Many assured shorthold tenancies include a rent review clause, which makes rent increases transparent from the outset and easier to introduce. The clause should say when and by how much the rent will increase during the tenancy. It doesn’t need to include an exact percentage figure but can give a range or link the increase to an index such as the CPI or inflation rate.

2 By negotiation

You can mutually agree the increase with your tenant. This can be done verbally or in writing, but it is best to have a written agreement to avoid problems later on.

3 By serving a section 13 notice

This is a legal notice which landlords can use if there is no rent increase clause in the tenancy. A section 13 notice formally notifies the tenant of a rent increase and can only be used once a year. To serve a section 13 notice, download form 4 from the government website. You will need to include information such as the date, amount and reason for the increase.

Can tenants refuse the increase in rent?

If your tenant doesn’t agree to the rent increase proposed in a section 13 notice, they have the right to take an appeal to the First Tier Tribunal – a tribunal which decides residential property issues.

How much notice do you need to give before raising the rent?

If your tenant pays their rent weekly or monthly, you need to give them at least a month’s notice of a rent increase. If they pay annually, it’s six months.

What about the Renters Reform Bill?

This bill, which is currently going through parliament, is likely to bring changes to fixed and periodic tenancies as well as the rules around raising rents. Keep an eye on the media and the government website to anticipate the changes before they become law.

If you’re a central London landlord in areas like Paddington, Victoria, Pimlico and beyond, talk to us. As specialist letting agents, we’d be happy to talk you through the things you need to think about and explain more about our services for landlords.

Want to find out more about letting your property? You can check out our articles covering how to sell a tenanted property, buy properties through a limited company, determining a reasonable rent increase amount, property inspections – and much, much more.