Landlord wants to link rent increase to interest rates

Anglabarn

Thanks everyone, it's great to get some impartial views on this.
It seemed pretty crazy to me, but then again this landlord has tried a few weird tricks in past so in a way I shouldn't have been surprised!

The thing is I really don't want to move (it's really hard to find anything livable & affordable in this area), so I'll try to steer the negotiation away from interest rates. Even if it means a fixed increase straight away, I'd rather know what to expect.

johnno71

Anglabarn wrote: »

Hi everyone,

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!!

Ok, so you don't want to move, but as several of the other replies have said you're not being offered a very fair deal.

How about something more reasonable that both protects you and makes your landlord feel like he's getting a fair deal. Both of you, of course, benefit from the certainty of a fixed term contract.

£10 per 0.1pc is way too much with a base rent of £820. Especially as we know two things for sure:

1. When interest rates do move (which may be a while) they are going only one way ... up!

2. The BofE tends to move in 0.25pc increments - sometimes in 0.5pc increments if they think it's urgent.

A move of 0.25pc is £25. With a base rent of £820 that equates to
a 3.05pc rent rise! :eek:

As someone pointed out, it wasn't that long ago that interest rates were 5pc. Back in 1992 they went as high as 15pc before we crashed out of the exchange rate mechanism (albeit they were only that high for a few hours).

What about suggesting a smaller rise that is also capped.

For example, you could suggest a £10 rise for every 0.25pc rise in interest rates. You might then cap the maximum possible rise at say £30 or £40 per year.

That would equate to a maximum rise of approx. 3.5 - 5.0pc, possibly less if interest rates stay low.

I guess your starting point would be what is the maximum extra you would be prepared to pay to stay where you are and where you're happy. Once you've decided that you can work backwards to decide what to offer.

johnno71

jjlandlord wrote: »

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.

That's right - it's the term that's fixed. The rent may or may not be fixed depending on the terms of the contract.

LondonBoy

Do not sign up to this!

Clearly the landlord is protecting himself against interest rate rises. That's not how the world works. The rent should be based on the market value of the property not his/her mortgage repayments. It the interest rates increase by 1% you will pay £920 for the property. Surly this will be above the market rate?

You need to go back to him with the rent figures for properties similar to yours in your area and settle on a price that is reflective of the market rate.

heathcote123

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) 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!!

Tell him he's an idiot.

DannyboyMidlands

Not in a million years. The proposed increases could be huge and you'd be legally bound to swallow them. That is not your risk to take.

Personally I'd be happy to stay on the current rolling contract but the risk is he'd serve you notice in order to increase the rent. If you REALLY love the place then sign a new contract for an increased rent amount.