What will be the market rate for forthcoming Section 13 rent increases?

What will be the market rate for forthcoming Section 13 rent increases?

9:51 AM, 4th December 2024, About a month ago 24

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Hello, When the Renters’ Rights Bill attains Royal Assent next year, and every application for Section 13 annual rent increase qualifies to be referred to the tribunal by your tenant for adjudication, what factors will judges determine a “Market Rate” to be (six months later)?

Will they conduct a survey via Rightmove, use local housing allowance rates in some circumstances, or visit a few lettings agents perhaps, or listen to officers in the council’s selective licensing dept. (Who’ve probably never been in business in their lives?).

The reason it concerns me is that it could conceivably drive down rent to well below what already existed, and from what your tenant was previously accepting, but subsequently thought what had they got to lose by challenging it (encouraged by Shelter and Generation Rent no doubt).

Let’s say I’d just completed a re-roof, plus new windows while scaffolding was up, including increasing loft insulation while the roof is open (to stand between rafters), etc etc., thereby resulting in reduced heating bills for the tenant. An investment of say £20,000.

Apart from an inflation increase like almost all other businesses automatically impose, I would need to gradually recoup part of that large (albeit capital) investment in the property by increasing the rent for a much better equipped house – not be obliged to significantly cut it below what it already was!

This scenario looks to be a very feasible prospect, unless I’ve fundamentally misunderstood this element of the bill as discussed and advanced at Committee stage. It could be revised to below your new five year fixed rate mortgage payment.

Thanks judge for making my slender profit become an unsustainable loss, and the reason for yet another “For Sale” sign appearing.

Thank you,

Andrew


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DPT

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16:52 PM, 5th December 2024, About a month ago

If the new online database of rental properties that is proposed in the RRB includes details of rent as well as other property details, then the Tribunal will have a ready source of comparables to use in their determination. If enough tenants use the process, the Tribunal itself will also have good data for comparison.

Richard Baker

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8:44 AM, 7th December 2024, About a month ago

Of course section 13 and rent tribunals exist already. I've had tenants take me to a tribunal twice - the tribunal asked me to submit 3x 'comparables' showing why I thought the rent I was proposing was justified, and the tenant was invited to do the same.
On both occasions, the tribunal set the new rent just below the figure I was suggesting, but much higher than the tenant wanted. It was almost as if they agreed with me, but wanted to make a token gesture to the tenant that they'd listened to their argument. For info, neither rent I'd proposed were at the absolute maximum in terms of the local market, so it was easy for me to find comparables for the figures I was proposing.

Jessie Jones

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9:38 AM, 7th December 2024, About a month ago

Reply to the comment left by PH at 04/12/2024 - 14:29
This will suit the government.
Despite all their rhetoric about looking after tenants, what the govt really want is lots of tax revenue. And when landlords sell up, they get a big hefty CGT, plus some SDLT from the new buyer.

Jessie Jones

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9:47 AM, 7th December 2024, About a month ago

Reply to the comment left by Richard Baker at 07/12/2024 - 08:44
I've previously had a trawl through the FTT decisions for determining the 'market rent'. To find enough examples I had to use a London borough so this is hopefully not representative.
The decisions appeared to be based on using comparable properties in the areas, but then deducting quite large sums for carpets that were a few years old, kitchens which were not brand new, decoration which was not done very recently. It was quite frightening, as there didn't appear to be any account taken of the fact that the properties with which they were doing the comparisons would not have brand new kitchens, carpets and decoration either.
Hopefully that was just one woke 'anti-landlord' FTT in one borough, but the lesson there was that there is no point in providing quality accommodation as the FTT will stop you from recovering your costs after a very few short years.

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