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  • G_M
    How/When can rent be increased on an AST?
    How and when the rent on an Assured Shorthold Tenancy can be changed is periodically asked here by both landlords and tenants. It depends on various factors:
    (note the following applies in England and Wales)

    MUTUAL AGREEMENT
    Rent can be raised (or lowered!) at any time, irrespective of the type of tenancy (Fixed Term or Periodic) provided both landlord and tenant agree.

    Normally such agreement should be in writing, but note that if, for example, the LL proposes a new rent, and the tenant starts to pay it, then by implication the tenant has accepted (agreed to) the new rent.

    DURING THE FIXED TERM
    In a Fixed Term tenancy of 12 months or less, it is unusual for there to be any clause allowing the rent to be changed during that FT. However there may be, so read the tenancy agreement.

    In a Fixed Term tenancy of over 12 months (eg 2 years) it is common for there to be a clause allowing the rent to be increased, normally after the initial 12 months. Again, read the tenancy agreement.

    If there is no such clause, then the rent cannot be increased during the fixed term (except as above by mutual agreement).

    Any clause allowing a rent increase must be unambiguous both i) as to when (eg at the end of the first 6 months) and ii) by how much ie :

    a cash amount (eg from 500 pm to 540 pm)
    a percentage (eg 3%)
    an amount linked to a recognised index (eg the CPI/RPI – Consumer/Retail Price Index)

    If the wording of the clause is vague, or makes it unclear/ambiguous as to when or how much the increase will be, the clause is invalid. A tenant cannot be presented with a rent increase that was not expected. A vague "The landlord will review the rent after 12 months" is not clear enough to be legally meaningful.

    Note that where a variable amount is specified ie the RPI, the index from 2 months preceding the increase should be specified. This allows the landlord time to calculate the exact amount of the new rent, and send it to the tenant a month before it comes into effect. If the index from the same month as the date of the increase is used, the tenant would have no clear advance notice of the precise amount of the increase, so could not be made to pay it.

    AT THE END OF THE FIXED TERM
    Often a landlord (or his agent) will offer a new Fixed Term contract. This can be at a new rent, and can be for any amount they wish. However, the tenant is under no obligation to agree. His options are:
    • agree and sign the new FT contract at the new rent or
    • negotiate and agree a different amount, and sign this amended FT contract or
    • move to a Statutory Periodic Tenancy (see this post here) at the same rent as before
    • Find a cheaper property and move out
    However, be aware that once you move to a SPT your security is reduced, and you can be given a S21 Notice (1st step to ending the tenancy) if the landlord thinks he can get a better paying tenant (and believes the higher rent will offset the costs of eviction and new tenant-find).



    DURING A PERIODIC TENANCY
    Most Periodic tenancies (sometimes known as ‘rolling’ or ‘monthly’ tenancies) are Statutory Periodic Tenancies, and follow on automatically at the end of a Fixed Term if no new contract is signed. The rent, and all other terms, are initially exactly as during the preceding FT.

    As stated earlier, the rent can be changed at any time by mutual consent, however other than this the original Tenancy Agreement must be checked:

    1) If there is a clause in the original tenancy agreement specifying how and when the rent can be increased, the landlord can only change the rent in accordance with that clause. As explained above, this must be clear, both as to when and by how much.

    Example: a Fixed Term tenancy of 6 months has a clause stating that at each anniversary of the start of the tenancy, the rent may be increased by 3%. At the end of the initial 6 months, the tenancy becomes a SPT, still at the original rent. 6 months later (ie 12 months from the start of the original tenancy) the rent can be increased by 3%.

    The tenant must be given advance written notice of this, usually of a full Tenancy Period. This is usually a month though precise dates are important - see this post for explanation of ‘Tenancy Period’. (annual or weekly tenancies have different notice periods).

    2) If there is no clause in the original tenancy agreement relating to rent increases, the landlord must issue a Section 13 Notice (see below). The rent can be increased by any amount, but as above, the S13 increase cannot take effect until (usually) a full Tenancy Period has passed. A S13 Notice must be in the prescribed form. A casual email, or conversation, is not a substitute (unless the tenant agrees - see 'mutual consent' above).

    Note that a S13 Notice can be challenged by a tenant, and referred to the Rent Assessment Committee, which may confirm the new rent, reduce it, or increase it, in line with local market rents. But note also that as the tenancy is periodic, if the landlord is unhappy with the RAC’s ruling (or indeed, unhappy with the tenant choosing to refer the rent to the RAC!) he may simply give the tenant (S21) notice to end the tenancy (see below).


    REFERENCES

    Housing Act 1988 section 13

    Section 13 Notice (example) Notice Of Rent Increase For Section 13 (MS Word format)

    Written demands (for rent etc: LL's actual address needed) Beitov Properties Ltd v Martin

    Ending/Renewing an AST (what happens when the Fixed Term ends?)(What is a Periodic Tenancy?)(How can a LL remove a tenant?)(How can a tenant end a tenancy?)

    Repossession (What happens if a landlord's mortgage lender repossesses the property?)

    New Landlords (general information for new or prospective landlords)
    Last edited by G_M; 20-08-2014 at 7:46 PM. Reason: Link to repossession advice added
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