Landlord wants to link rent increase to interest rates

Anglabarn

Hi everyone,

I've rented from a private landlord for two years. We had a fixed term contract for 18 months which changed to a rolling contract in January. Now the landlord has contacted me to say he wants to renew the fixed contract (retroactively, i.e. from January) but since I'm such a good tenant the rent would not be increased.

However, he wants to add a clause in the contract to say that if interest rates go up, the rent would go up by £10 for every 0.1 percent increase in interest rates.

Does anyone have any advice on how to handle this? To me it seems like a rather risky deal... if the interest rates go up by 0.5 that is an increase of £50 for me. I'm currently paying £820/month so it would be 6% in one go.

I am very happy where I am and don't want to move, but I could do with some help on how to negotiate. Many thanks!!

vikingaero

Well interest rates are unlikely to go down so he has it made if you agree to this.

Also you need to find out which rate he is basing his calculations on? His own bank rate, LIBOR etc

Seems like this Landlord wants his cake and to eat it.

Taiko

I wouldn't entertain that if it were me, not sure about others.

Lokolo

The increases are huge. Interest rates were 5% a few years ago, would you be happy for a £500 increase in rent?

I would tell him to shove it.

Hump

You can't backdate the contract (and why would you). This scheme sounds crazy, has your landlord sought professional help? If he or she and you are hell bent on this then ensure it's an annual increase and not more frequent.

G_M

Anglabarn wrote: »

Hi everyone,

I've rented from a private landlord for two years. We had a fixed term contract for 18 months which changed to a rolling contract in January. Now the landlord has contacted me to say he wants to renew the fixed contract (retroactively, i.e. from January)can't be done but since I'm such a good tenant the rent would not be increased.
What do you want? Are you happy on a rolling contract or would you prefer the security of a fixed term?
However, he wants to add a clause in the contract to say that if interest rates go up, the rent would go up by £10 for every 0.1 percent increase in interest rates. Not legally possible. If you agree a fixed term contract (6, 12 months whatever) the rent is ..... fixed.

Does anyone have any advice on how to handle this? To me it seems like a rather risky deal... if the interest rates go up by 0.5 that is an increase of £50 for me. I'm currently paying £820/month so it would be 6% in one go.

I am very happy where I am and don't want to move, but I could do with some help on how to negotiate. Many thanks!!

How you negotiate depends what you want.

You could politely decline a fixed termcontract, say you are happy with the current flexibility of a rolling contract, and would like to continue. His choices are then to evict you (costs him money); accept your decision; or increase the rent by a set amount using the correct procedure.

If you want the security of (and obligation of), say, 12 months fixed term, you could politely agree his increase, knowing that whatever clause he puts into the contract will be invalid, so if he tries to increase the rent in line with inflation in, say, 4 months, you could simply refuse to pay.

DVardysShadow

I would not entertain this. I would tell LL that if his costs increase, he can negotiate a rent review in the normal way, such that the new rents can be subject to review against the local rental market.

PasturesNew

You really do "hear it all" on these boards.

Lazzza

Unless you are getting a sweet deal already then I wouldn't entertain it for a moment. Market rates of rent don't directly follow base rates (as much as BTL landlords try). Those interest rate risks should be worn and managed by the owner, not passed on to tenants.

jjlandlord

Not legally possible. If you agree a fixed term contract (6, 12 months whatever) the rent is ..... fixed.

The fixed term binds both parties for the length of the term, but nothing prevents the agreement for the term from including a rent increase mechanism.

theartfullodger

Your Landlord sounds like he's a loony (there are a few...) which, if that is the case, would make me recommend you find somewhere else to live anyway...


He of course wants it both ways.. he's no doubt, like most LLs, been hugely benefiting from the historically low interest rates which will mean he's been making much bigger profits that anyone forsaw.. and now wants to bleed you dry to fund his (possibly not..) lavish lifestyle.

Ask him if he reduced his esteemed tenant's rents when interest rates dropped... using the same formula he is now proposing..

Aye, right...

Cheers!

Artful (Landlord..)