What is considered a fair rent increase or are there limitations?

You can increase it to market rates (there’s no cap in England). The tenants can accept it, negotiate a better deal, take it to a Rent Tribunal or find somewhere else.

I think 20% would be reasonable due to inflation (if the market supports such an increase.

market rate - and if necessary show them examples of similar properties in the area with the rental rates as a comparison. Especially useful if its a big jump in the rent.
Never get into your own personal reasons for the rent increase - just say its to get back on track (if the current rent lags behind) with market levels but it is indicative of all the increased costs of running the rental property they currently live in.

I recently raised the rent to just under market rate but then for warned the tenant that while increases to date have been sporadic (one 6 years before, one two years ago), a small annual increase will be necessary each year from now on to void the issue of a higher hike later on. You can explain this will then always mirror the market a the time and allow them to also keep their options open.

It gives the tenant a bit more of an understanding of what things a LL has to consider when thinking about increases. It actually educates tenants too. If they see things like the EPC issue raise its head again and the cost to the LL, then they know rent increases will be inevitable because of this.

In a small way I hope it moves the tenant to see what we as LL's all know is happening...tenants are ultimately getting shafted by the government who believe they act at all times 'in the tenants best interests'!

Just think of the kick back if every tenant could clearly see the direction of travel here with everything from the RRB, EPC demands, selective licencing more enforcement and talk of rent freezes....

Less supply, higher demand - rents go up...

Personally I agree that regular increases are the way forward. In low interest/low inflation times it was easy not to increase - then suddenly with high interest/high inflation, it's easy to get too far behind, too quickly. I found I had one place I'd not increased for 10 years.

Nowadays I try and pitch the rent about 10% below market rate for renewals. If the tenant is good why risk a possible bad tenant - plus a void, remedial costs and letting expenses? That why the tenant feels better too. When a property becomes available, that's the time to go for full market rent.

Reply to the comment left by Neil P at 25/03/2024 - 10:46
it will be the only way forward if rent freezes similar to that in Scotland rear their ugly head here so that LL's can actually keep the properties going as a viable business.

tenants are in for a shock!

After 5 years without a rent increase, my rents had fallen way behind the market rate. I've now sold one and raised the rent by 9% for 2 successive years for my remaining BTL, and explained why. My tenant wasn't happy, but couldn't really complain when she'd had no increase for 5 years. I've now offered to sell to her, which she's considering.

By the way, you don't need to issue a new AST after 12 months. It automatically becomes Periodic, and you can simply issue a S13 notice of rent increase.

Regular smaller increases are vital to meet your expenditure and obligations incl increased costs imposed by the government. Now you have fallen behind you need to increase to just short of a market rent, giving say 10% discount off the market rent figure to reflect the Ts long term occupancy.
You can negotiate a rent but record your negotiations by email\letter, risk S13 route, rely on a tenancy clause that deals with reviews or end the tenancy and offer them a new one on different terms incl rent.
Act before socialist Gove screws your options.

Not increasing the rent by small increments when the market changed was your mistake. Imposing a large increase now would therefore seem a little unfair and unless it will make the letting unviable, I would suggest a maximum of somewhere between 5 and 8 percent with a view to increasing it to market level over time.

I increased one by 15% this year. It will rise by at least 10% next year.

It is currently 24% below LHA (long term tenant isn’t entitled to 4 x bedrooms so I charge the 3 x bedrooms rate).

If they choose to leave, I’ll revisit my options. It could be a small HMO or I could sell. I’m minded to sell.

I used RPI tables to change rate, giving RPI values in letter. Tenant agrees it's fair.

Unfortunately there are so many landlords who argue that they run a business but have no business acumen. By not increasing the rent , even marginally at regular intervals they short themselves in the foot. It’s always the same old excuse, they always pay the rent and keep the property in reasonable condition. You are learning the hard way that these two things are the minimum contractual obligation.
How can you possibly invest in your business if you don’t have the financial resources?
The only advantage you have at the moment is that you have the stock of a product that’s in demand and that may save your bacon!