How (best) to increase the rent with longstanding tenants?

I always review rent on a yearly basis. I manage my properties myself and so have a good dialogue with my tenants on an ongoing basis.

Even if a tenant is only on a year long agreement I usually let this become a rolling monthly if they stay on longer than a year. I then say to them that will have an informal agreement that they'll pay the mutually agreed increase instead of what was on the original AST. This is often £25-50 more per month but those increases have been more recently, but are limited by the AST such that they cannot be more than 10% pa.

This has never caused a major problem but some tenants have questioned whether they can afford the increase. I have negotiated and met in the middle in the past.

Like the previous respondent I've explained costs have increased and that although we have a good relationship it is a business and I need to move with the markets to keep the business profitable rather than loss making. I've also pointed out that the government have increased taxes and costs for landlords in recent years so that is also putting pressure on rents.

Most tenants understand and if they can't afford it they are welcome to serve their notice and I'll bring in a tenant who can. I've never had more than about 3 weeks vacancy on a property in 14 years and if the house doesn't need much doing to it then it can be relet for less than a month of lost rent which you'll get back in 12 months with a tent increase.

Never keep rents low even for good tenants. It will ultimately lose you money and maybe put you out of business. Plus it is not healthy for a new tenant to hear their friend pays £200 less rent because they get on with the landlord and sweet talk them into keeping rents low. Also that person will eventually have to go back to paying market rate when they move on and that will be a bigger shock to their finances than smaller increases each year. Keeping rents low isn't kind for anyone in the long term.

Hope this helps.

Reply to the comment left by psquared at 03/01/2023 - 11:56
We did exactly what the first response said. One of our tennants hadn't ever had an increase in 15 years and was massively below local rents, she was paying the same rent for a 4 bed as for a 2 bed flat! We didnt even increased rent when we spent £5000 in 2021 improving the house for her with a new boiler, new front door, insulation, chimney capping etc. (Work that we usually undertake between tenancies but this family is in it for the long haul so we wanted to make these improvements and not wait for if they ever moved out). We started with a long and detailed whatsapp as to why we needed to make an increase, how much we needed to increase by and how much local rents are now and how much under these she would still be. She replied almost instantly saying she'd expected an increase years ago and thanked us for being the best landlords she'd ever had. We want her to continue to stay, she keeps the house so beautiful, they make cosmetic improvements without asking me to fund them and her neighbours on one side are awfully loud and annoying so we consider the large discount from local rents as her reward for being good and putting up with them too (she'd still a couple of hundred a month under local rents even after the increase!). I'd rather take less rent than push out decent and honest people. So long as we maintain a small profit then we are happy. We provide lovely housing for good and honest people.

I then replicated my whatsapp to all of our other tenants, they also all immediately agreed...... especially the one with solar panels!

I sent them a letter confirming the new rent which was to start after their next payment and had them sign and send a copy back in the prepaid envelope which they all did, then the rents were paid at the new amounts when they should have been and this makes the rent increase formally accepted. No need for section 13 and all that.

This informal process works with decent people who appreciate you as a landlord. I feel this less formal approach suits us well as we currently only have good, working tenants in our houses.

Good luck to you all in your quest to house people in good homes.

Reply to the comment left by Richard Burton at 04/01/2023 - 23:21
I wonder whether intimidation of the LL is a factor

Reply to the comment left by psquared at 03/01/2023 - 11:56
Great words, I've just edited mine using your suggestion at the top.
Anyone else wishes to copy mine, please do, no copyright here, we need all the help we can get. Yes mine won't be everyone's cup of tea-If not, don't use it then.

Miss XXX XX be XX XX Gardens Top Valley Nottingham NG5 XXX £750pm from 29 January 2023

And also DWP UC District manager, notes for you at the bottom.

Dear XXX,

Because you don’t ask for anything & are long standing, we are not going to increase your rent to market rents saving you between £100 & £300pm, but Selective Licensing & new increased costs have to be paid for-Your old low rent doesn’t pay for these. You have to start writing in to the Council to let them know you don’t have a problem & are paying cheap rent, otherwise they will just keep bringing things in that will increase your rent every year.

XXX has made the decision to bring your rents more in to line with what costs Landlords have had increased upon them. For years, if you didn’t know, we have tried to look after you with small rent increases, but if you didn’t know, your rent is much cheaper than what the market commands in these times of onerous legislation. Please look & you will see.

Rental Property has gone through a very testing time since 2018 & the Government & Councils implementing all sorts of costs & charges & Legislation on ALL Landlords, to try & get at the minority bad ones. This however has increased costs massively on the good landlords & tenants that didn’t have a problem before.

We now have to do Fitness tests on new rentals £150 each house.
Electrical Installation Condition reports organisation & implementation £300+ each house.
Selective Licensing £890 just for one house.
Legionnaires checks £70 each house.
EPC’s £80 each house.
Data protection checks £40.
Carbon Monoxide detectors & smoke detectors, when wired, £300 each house.
Getting registered with Information Commission officer £40.
Floorplans, Inventories £90 each house.
Landlord has to criminal check himself & has to prove he has Right to live in UK
Massive costs associated with Universal Credit
Increased staffing admin behind the scenes.
As you’ve seen, checks/inspections on your houses now with smoke alarms-Should be much more detailed checks.
Consultant & Legal fees to keep pace with legislation & staff training.
Letting Agent costs for new tenancies & house swaps £70pm each house.
All the above is extra costs we din’t have when many of u moved in.

Landlords are selling in their hundreds due to the increase in costs & the burden of ever increasing legislation.
Landlords are being fined when they get something slightly wrong.

As a company, we are really struggling to keep abreast with these constant legislation attacks, so much so, some of u know all new ones/swaps, we are having to place with Letting Agent.

The biggest changes are Selective Licensing & Universal Credit. Costs an absolute fortune in time & money to keep on top of it.

There are many Landlords out there who aren’t compliant, who are becoming unstuck every week.

We have no intention of selling on you & want you for the long term.
For us to continue & keep your property compliant, we cannot keep your rents as low as they are. So please excuse us for having to increase your rent to somewhat nearer normal levels.
Too cheap a rent & eventually that Landlord can go bust, it is the constant increase in charges by Govt & Councils that has forced this on us & you.

As with all other business’s, our company has to increase costs in line with inflation, builders costs rising, materials, fuel, property insurance etc. etc.

Even more so, with recent Government changes regarding Clause 24 Landlord Taxation, dubbed the tenant tax & also the Nottingham Selective Licensing Tax which the Council are asking for up front all in one go.

So as of today, we hereby give you at least one months notice that we will be increasing your rent to the amount at the top of this letter from the date at top of this letter, & this will be your annual rent increase.

If we don’t do this & you are still living here in 10 years-Which we hope you are, we will have a problem with some big unexpected repairs. As roofs 10 years ago was approx £2,000. Today they are nearly £4,000. In 10 years they could be £7,000 & if the same low rent after inflation, there wouldn’t be enough funds to pay for these big repairs.

Please telephone me should you wish to discuss this letter.

Below are other reasons why Landlords are packing up & why u can’t get anywhere any more, & remaining Landlords charging what rent they like:
1. Wear n tear allowance scrapped.
2. Stamp duty for BTLs.
3. 100% council tax payable on void properties from day 1 (not even a 25% discount).
4. Reduction in deposit amounts ( 5 weeks is woefully inadequate).
5. Unable to take pet deposits.
6. Council tax single banding for HMOs.
7. Section 24 tax, no other business is unable to offset their costs.
8. Numerous unfair decisions against landlords made by the deposit schemes, whilst landlords are unable to have a rogue tenant database, only a rogue landlord list.
9. Scrapping of fees for application and referencing which has led to higher costs from agents.
10. The lack of help with COVID and the court system being unfit for purpose, with a further insult of section 21 being scrapped!

If you are claiming Universal Credit UC, could you please notify them of our intentions & pass this letter on also. In other words, please read below:

UC require you by their rules to notify them of rent increases. However they also don’t make it easy & say you can’t tell them till it has actually happened. Whereas it is tenancy law/rules, that I must tell u at least a month before. Bonkers that you can’t tell them though, as you have been able to tell Housing Benefit 2 months before for 24 years. And they just put it on system.

Please put this new rent amount on your journal. UC also want us Landlords to tell them, but don’t tell us how we should tell UC also.

Although initially, you have to pay me out of your own pocket, ask UC to refer you to the LHA rate applicable at the time to help you with this rise.

You may, if you wish, like to use the enclosed draft letter to UC as a guideline & ask them if they could refer it to the LHA rate applicable at the time. If you prefer, you can write your own out. Whatever you choose to do, please send UC a copy of this letter, along with a copy of the enclosed draft letter (or your letter), as soon as possible. If the LHA rate renewal is not due, ask UC to save these letters & pass it on to the LHA rate when it is due to be looked at it.

Some notes below which is correct on the subject, although most UC staff don’t know:

The onus is on the tenant to report the change. Alternatively, if I’m receiving the "housing costs" direct, I as your landlord, am also obliged to notify the DWP of any material change in your circumstances, including an increase in rent charge.

Dear DWP Service Leader (formerly District Manager),

I write to advise you that our tenant above, their monthly rent has increased with effect from above date. Their rent is currently paid direct to us, as his/her landlord, so we’re obliged to notify you of any change that has a material effect on his/her rental charge.

You work out the Benefit Assessment Period BAP, and I’m notifying you to insert this change during the course of their BAP. Please ensure that the change is applied during the BAP period in line with Universal Credit regulations and DWP’s Advice to Decision Maker’s Guide. Details are included in the following UC Advice:
bulletin https://universalcreditadvice.com/articles/2699/

Please acknowledge this notification as sufficient to make the necessary changes to his Universal Credit award or, if not, explain why you’re refusing to apply this notification of a material change to their “housing costs element”.

I look forward to hearing from you.

Yours sincerely,

Mick Roberts (Creditor Ref Number. XXX)

This is a very difficult position that I have also been mulling over, without much success. I am running at between 8% & 23% below market rent, and my target is 12.5% below for long term tenants who look after their homes.
I didn't increase at all over two years of Covid, which is why mine have fallen so far behind; a decision I now regret.
A Section 13 notice is the correct approach, but I provide a covering letter and I deliver them by hand, hoping to have a brief chat at the doorstep if they are at home. In my letter I point out that the rent cannot rise again for at least 12 months and I also inform them of what both the CPI and the market value for their rent is. My increases are never higher than these.
I do not try and justify the rent increase, as no matter how valid my reasons are, my tenants will have their own reasons why they cannot afford an increase. I use the brief chat to apologise that it is the time of year for the rent increase and ask if there are any maintenance issues they need me to address.
Going forward, I have learned not to let the amount I charge to fall any further behind. Once it is behind, it is perhaps too painful trying to bring it back closer to market value.
On a positive note; when a tenant recently threatened to leave despite a less than typical rent increase, I consoled myself with the knowledge that I would at least be able to re-let the property at full market value again. Unfortunately, she reconsidered her position, which is a shame as her rent is the one at 23% below what I could get.

Just be thankful you don't live in Scotland where we can't increase the rent - or get rid of tenants who are in arrears. I have very good tenants overall but one couple is in arrears and although they've started paying regularly again they aren't paying anything towards the arrears and just ignore all contact. And there is nothing I can do!

I'm just about to up the rent by £25 a month for all tenants who I am renting property to, for whom the rent is currently pitched at exactly the LHA rate for the area. So that means for the first time they will pay top ups. They will complain - but I will quickly remind them that 1. the government froze the LHA rate in 2020 yet all my running costs have spiralled. 2. It is impossible to find ANY property in the area to rent at the LHA rate as I do. 3. They are getting a 10% increase in income (benefits) in April for which actually people who are working are NOT getting, plus additional pay outs from the DWP for energy far in excess of others who work do. They are all in C rated EPC properties to boot.

So all in they are getting a bloody good deal and if they don't like it they can move out if they so wish!

Reply to the comment left by Jessie Jones at 07/01/2023 - 15:12you need to up the rent to the common market rate for the tenant that's getting a 23% reduction as soon as you can notice at month 11 after the recent rise). OR a S21 now.
However painful you are in this to make something after all. You are not a charity! She reconsidered as there is nowhere else that cheap - if you keep even 10% below the market rate she's got a good deal given the current climate