Rent review clause - is this legal?

daKlone

My daughter has asked me to be guarantor for her new rental property and I have just received a copy of her contract. Having a look at it, this worries me:

"The Rent may be increased from the first anniversary of the commencement of the Term by at least 5% and in respect of any increase the Landlord will serve upon the Tenant in accordance with section 13(2) of the Housing Act 1988 (as amended)."

Which as I read it means that the rent can go up by no less than 5%, upto an unspecified amount. That doesn't seem right to me...what do you guys think?

G_M

* Rent increases: when & how can rent be increased?

Is this a 12 month Term? 2 year? Or what?

daKlone

Thanks for your reply.

It's a 12 month agreement, but she is highly likely to stay on after that.

I read through the stuff on that link but still wasn't 100%, hence the request for a 2nd opinion. I don't want to make a fuss over nothing.

Miss165

I could be wrong but I'm pretty sure after the fixed term, the landlord can increase the rent to whatever they like so long as they give the appropriate notice.

If your daughter doesn't like the rent increase, then she could leave once the fixed term was up (assuming she was notified of the rent increase so far in advance, and had time to give her notice if for example, her lease requires say 2 months notice)

G_M

The contract will end after 12 months (you say). Does the contract say anything elsewhere about what happens after 12 months? eg that a periodic tenancy will follow?

If so, this would be a Contractual Periodic Tenancy.
If not, it would be a Statutory Periodic Tenancy (though potentially the rent clause could imply a CPT follows).

After 12 months the landlord could offer a new (fixed term) contract at any rent he wishes, and the tenant can agree, or negotiate, or leave.

Alternatively the tenant can decline a new fixed term (or it may not even be offered) and a periodic (monthly) tenancy would arise automatically.

The LL could then Serve a S13 Notice to increase the rent. Such a notice must specify clearly what the new rent will be, and must give a full tenancy period's notice (ie at least a month).

The mention of "at least 5% "is, I believe, meaningless, since the S13 could actually be for any amount the LL chose.

The tenant could refer it to the RAC.

It's a pretty pointles clause as the LL could do this anyway.

daKlone

Thanks again guys.

The contract says:

"If the Landlord allows the Tenant to remain in the Property after the Term has expired then a
statutory periodic tenancy shall arise under section 5(2) of the Housing Act 1988 on a monthly basis.
To end the periodic tenancy, the Tenant shall give the Landlord at least one month's notice in
writing. The notice must end on the day before the rent is due."

davidmcn

G_M wrote: »

The mention of "at least 5% "is, I believe, meaningless

I think its only purpose is to allow the tenant to complain if the rent increase is for less than 5%...

G_M

davidmcn wrote: »

I think its only purpose is to allow the tenant to complain if the rent increase is for less than 5%...

:T ..........


:rotfl:

G_M

daKlone wrote: »

The contract says:

"If the Landlord allows the Tenant to remain in the Property after the Term has expired then a
statutory periodic tenancy shall arise under section 5(2) of the Housing Act 1988 on a monthly basis.
To end the periodic tenancy, the Tenant shall give the Landlord at least one month's notice in writing. The notice must end on the day before the rent is due."

OK - so now we know that whoever drew up this contract is a moron!

1) there's very little (indeed nothing) a LL can do to STOP "the Tenant to remain in the Property after the Term has expired" So that "If" is completely meaningless.

2) A Statutory Periodic Tenancy arises automatically if the tenant remains unless no other ageement is in place. But if the contract specifies what will happen (as here), and esp if the 'L has allowed...' then a Contractual Periodic Tenancy arises (because the 2 parties have agreed via a contract that this will happen).

3) Furthermore, the Housing Act 1988 does not state how a tenant should give notice (a legal oversight?). So by specifying the notice in the contract, it must mean that a Contractual Periodic Tenancy will arise.

(not to mention that requiring " The notice must end on the day before the rent is due" is highly unusual given that tenancy periods do not necessarily end on the same day as rent is due.)

Miss_Samantha

I agree that the drafting is bad, but...

This just restates the legal position. It does not create a contractual periodic tenancy, especially when it makes it clear that this isn't what is intended.

The part about the notice to end the periodic tenancy is therefore useless.

The rent review clause is also poor. I don't understand the point of mentioning section 13, it is just confusing and potentially destroys the goal of having a rent review clause in the first place.
In any case, if there are problems I would argue that stating a minimum increase of 5% without upper limit has to be an unfair term. This means the plain s.13 procedure is the only applicable procedure.

daKlone

Thanks again guys.

Do you think there's any point in mentioning this to the letting agent?

I'm getting the impression that although the contract is badly written, it is not in any real sense detrimental. Is that right?