Can I index link rents into my tenancy agreements?

We normally add a clause to ast to use From the Expiry Date the Rent is subject to an annual upwards only increase in line with the Index of Private Housing Rental Prices.

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/january2022

That's an interesting link. Although it's not the latest one. This appears to be the latest figures:

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/april2022

So the Office of National Statistics says that rental prices rose in the period from April 2021 to April 2022 but they are not yet back at the prices of April 2016 (guessing that could be a Covid effect over the period that tenants were told they didn't have to pay).

Anybody's mortgage interest rates on the way down at the moment?

Reply to the comment left by DSR at 16/05/2022 - 16:55
I am querying the one month's notice that must be given on a standard AST for a rent increase at the end of the fixed term. The reciprocal notice period for terminating the agreement is set as two months. This would mean that if I wait until just over one month before the end of the fixed term to notify the tenant of the rent rise, and they don't agree and want to leave, then I would have to give them two months' notice and the existing rent would be in place while the notice is worked. Or can I just ask them to leave at the end of the fixed term, which would be around one month later. Supposing they take a couple of weeks to make up their mind? I am losing the potential rent increase during that time.

How do I leave this discussion? 🤪

Reply to the comment left by Helen at 18/05/2022 - 18:36
So whilst I accept that New Yorkie wants to leave this discussion I'm learning from it. DSR previously posted

"When your landlord can increase rent
For a periodic tenancy (rolling on a week-by-week or month-by-month basis) your landlord cannot normally increase the rent more than once a year without your agreement."

"For a fixed-term tenancy (running for a set period) your landlord can only increase the rent if you agree. If you do not agree, the rent can only be increased when the fixed term ends."

I think probably that only giving a tenant one month to find new accommodation if the rent increase is above local market rents is tough on the tenant. It's not something I would do (unless I had to). In principle I don't really have a problem giving them six months. But there's a but.

At the moment you cannot deduct all your finance costs from your rents. So if you are like the vast majority of landlords and only have 1-2 properties you are being punished. It's a policy that favours the big boys who have incorporated and punishes the small landlords i.e. the majority.

On the advice of my agent I have held rents down slightly below local market rates to reduce the risk of void periods. But if you cannot deduct all your finance costs in the first place and secondly you are anticipating that mortgage rates might rise then this increases your risk. It increases your risk more if the government said during a recent pandemic that tenants don't have to pay, you've lost money and you need to recover it.

At a time when interest rates have just been nudged up by the BOE and inflation is close to 10% (mostly because of rising energy costs) current policies are creating an increased risk for landlords who have held their rents down. Current policies favour an increase in inflation.

this is one of the reasons i asked this question I am a full time landlord its not a hobby its a business I'm not a LTD company and this is my only income it makes my blood boil when i hear agents say we recommend undercharging on rent because it makes there lives easier and your bank account lighter i see it all the time agent rent advertised 495 when all the other landlords are getting 600 plus with no voids

Reply to the comment left by chris at 19/05/2022 - 10:25It's not a hobby for me either. I'm an accidental landlord. The majority of landlords have about 2 properties. And they are mortgaged.
There was someone on television last night talking about the proposed changes to renting who said that landlords were "rich people". In many cases landlords are just middle income people who either became landlords by accident or were just trying to create a pension that was more reliable than the financial services industry would be likely to provide. They are not all Russian oligarchs...far from it.
The policy that says that you can't deduct all your finance costs has a knock-on effect. Although in principle you are allowed to treat the costs as a deduction from your taxable income if you are in the basic rate band it also artificially increases your income which means you lose out elsewhere (particularly if you have children with working tax credits for example).
Bottom line is if interest rates go up then rents are going up. And even people like me who took the advice of their agent and held their rent down slightly are going to put their rents up.

There is no reason why you cannot put a review in like this but it depends what you are trying to achieve.

As you are probably aware the RPI is in effect a reflection of the cost of living so that you are not in effect getting any more money you are just ensuring that if you were getting paid £500 at the start of the tenancy on the 01.02.21 at the review you are getting monies worth of £500 at that review.

If you are actually intending to have your rent reflect the market increases you are better off looking at something like this from the office of stats

https://data.london.gov.uk/dataset/index-private-housing-rental-prices-region#:~:text=The%20Index%20of%20Private%20Housing%20Rental%20Prices%20%28IPHRP%29,sources%20and%20is%20classified%20as%20experimental%20by%20ONS.

i hope this all helps

Charles

I have written about RPI and CPI increases for commercial rents here (EGi subscription needed).

An issue which arises with ASTs is that most are for 12 months or less. If the tenant can serve notice and leave, the rent increase may only operate for a short time. Therefore it is only those tenants with longer leases who might be bound by the review.

As others have mentioned "the rent increase must be fair and realistic, which means in line with average local rents". Linking it to RPI or CPI does not necessarily do that.

Paradoxically it might limit the rent increase if market rents in your area rise faster than general inflation.

Reply to the comment left by NewYorkie at 16/05/2022 - 09:50
That’s fine….. but remember a rent increase means a new tenancy. You must then comply with supplying Right to Rent, EPC and gas safety to be sure there are no Shelter type blocks if you serve notice in the future?