How Landlords Can Increase Rents While Staying Competitive and Compliant

As a landlord, you may find that rising costs, inflation, or improvements to your property mean it's time to consider increasing the rent. However, navigating rent increases requires a careful balance—keeping your tenants satisfied, remaining competitive in the market, and ensuring you stay compliant with the law. If you’re looking to increase rents, here’s a guide to help you do it the right way.

1. Understand the Legal Framework for Rent Increases

Rent increases must comply with the law, particularly if you are operating under an Assured Shorthold Tenancy (AST). Key rules to follow include:

• During a Fixed-Term Tenancy: You can only increase rent if the tenancy agreement allows for it (via a rent review clause) or if the tenant agrees to the change.

• Periodic (Rolling) Tenancies: You must provide at least one month’s written notice for weekly or monthly rental payments. If rent is paid annually, you need to give six months’ notice.

• Using Section 13 Notices: If there’s no rent review clause and you’re in a periodic tenancy, you must use a formal Section 13 notice to propose a rent increase.

Always follow proper procedures to avoid disputes, and be aware that tenants can challenge rent increases they deem unreasonable through a First-Tier Tribunal.

2. Assess the Local Rental Market

To remain competitive, it’s vital to understand the going rates for similar properties in your area:

• Research Local Listings: Compare rents for similar-sized properties in similar locations using platforms like Rightmove, Zoopla, or local letting agents.

• Factor in Features and Upgrades: Adjust comparisons based on amenities such as parking, modern kitchens, or additional bathrooms.

• Stay Competitive: If your rent is significantly higher than similar properties, tenants may be tempted to move elsewhere.

Conducting thorough research ensures your rent increase reflects market demand while still being fair to your tenants.

3. Make Justifiable Improvements to Your Property

Tenants are more likely to accept a rent increase if they see tangible benefits. Investing in property improvements can add value and justify higher rents:

• Modernise Kitchens and Bathrooms: Upgrading these high-use areas can make a significant impact.

• Improve Energy Efficiency: Install double glazing, insulation, or a new boiler to reduce tenants’ energy bills.

• Add Amenities: Features like dishwashers, washing machines, or improved storage can increase property appeal.

• Enhance Outdoor Spaces: If your property has a garden, patio, or balcony, maintaining or upgrading these areas can justify higher rent.

Show tenants the value they’re receiving to make rent increases feel reasonable.

4. Communicate Clearly and Transparently with Tenants

When proposing a rent increase, open and honest communication is key to maintaining a positive relationship with tenants:

• Give Adequate Notice: Always adhere to legal notice periods.

• Explain the Reason: Share why the increase is necessary—rising costs, market conditions, or property improvements.

• Show Market Comparisons: Provide data on local rental prices to demonstrate that your increase is competitive.

• Offer Flexibility: If appropriate, offer options such as a phased increase over several months.

Approaching the conversation with transparency helps build trust and increases the likelihood of tenant acceptance.

5. Consider the Timing of Rent Increases

Timing is everything when increasing rent. Be mindful of the following factors:

• Renewal of Tenancy Agreements: Propose rent increases at the end of a fixed-term tenancy when a new agreement is being negotiated.

• Market Conditions: Ensure the rental market supports the proposed increase; raising rents during a slow rental period could risk tenant turnover.

• Tenant Circumstances: Avoid increases during periods of financial hardship or personal difficulties where possible.

Strategic timing can make the rent increase more acceptable and reduce the risk of tenant turnover.

6. Offer Incentives to Retain Good Tenants

Good tenants are an asset, so increasing rent while showing appreciation for their tenancy can strike the right balance:

• Small Upgrades: Offer to repaint a room, replace carpets, or upgrade appliances as part of the rent increase.

• Fixed Rent Agreements: If tenants agree to a rent increase, offer to fix the rent for a longer period (e.g., 18 months instead of 12).

• Flexible Payment Options: Allow tenants to spread the increase over a few months if they’re struggling with an immediate change.

Incentives can help smooth over rent increases and encourage tenants to stay.

7. Review Your Expenses and ROI

Before increasing rent, review your property expenses and return on investment (ROI):

• Calculate Costs: Consider mortgage payments, maintenance, insurance, property taxes, and potential void periods.

• Evaluate Profit Margins: Ensure the rent increase improves your ROI without being unreasonable.

• Prepare for Void Periods: Weigh the risk of losing tenants due to a rent hike and facing potential void costs.

A rent increase should be financially justifiable, ensuring it supports both your expenses and long-term investment goals.

8. Stay Competitive Without Undercutting Yourself

While staying competitive is key, don’t undervalue your property:

• Highlight Unique Selling Points: Focus on what makes your property stand out, such as location, modern fixtures, or amenities.

• Offer Added Value: Consider inclusive perks like high-speed internet, garden maintenance, or white goods to justify a higher rent.

• Maintain a Well-Kept Property: Tenants are more likely to pay higher rent for clean, well-maintained homes.

Striking a balance between competitiveness and profitability ensures you attract and retain tenants at the right rent level.

9. Document the Rent Increase Properly

When increasing rent, ensure you follow proper procedures and keep records:

• Provide formal written notice with clear details of the new rent, start date, and how tenants can respond.

• Use a Section 13 Notice for periodic tenancies without a rent review clause.

• Retain copies of notices and communications for your records.

Proper documentation ensures compliance and protects you in case of disputes.

10. Work with a Letting Agent or Property Manager

If managing rent increases feels overwhelming, consider working with professionals:

• Letting agents can provide expert advice on market rates and timing.

• Property managers can handle communication, notices, and tenant negotiations on your behalf.

• Professionals ensure you remain compliant with legal requirements.

Working with an experienced agent can save time and help you maximise rental income while maintaining tenant satisfaction.

Conclusion

Increasing rents is often necessary to cover rising costs and maintain profitability, but it must be done carefully to stay competitive and compliant. By understanding the legal framework, researching the local market, communicating transparently, and adding value to your property, you can successfully implement rent increases without risking tenant relationships or void periods.

Need support managing rent increases or staying compliant? Contact us today for expert advice on managing your rental properties efficiently!