With government policy putting the squeeze on landlords and making it hard to make a profit, it’s inevitable that some may be considering increasing rents.
Rents tend to remain static, maybe due to a long-term tenancy, and can easily fall behind market values.
On top of this, to enable them to let legally and safely, landlords have to follow and ever-increasing number of rules and regulations, many of which – such as ensuring a rental property has a minimum EPC rating of E by April 2018 – involve investing in the property.
But raising rents can be a tricky subject to raise with a tenant, so the experts at Belvoir have produced some tips to help you.
Annual review
“It’s important to be timely regarding rent increases and an annual assessment and review of your tenant’s rent is advisable,” says co-owner of Belvoir Melton Mowbray and Belvoir Bingham Katie Archer.
“The Tenancy Agreement we use at our offices in Melton Mowbray and Bingham, for example, states that a tenant’s rent can be increased after the first 12 months at a property. We usually diarize this on our automated system so that an assessment can be made at the 10-month mark and we have time to implement a rise as appropriate if the landlord wishes us to do so.
“It’s important to give the tenant adequate notice before the rent increase happens. At Belvoir Melton Mowbray and Belvoir Bingham we let a tenant know two months in advance which gives them time to change standing order instructions, etc.
“Always be realistic and reasonable with the timing of your rises. Multiple rent increases within a short timeframe are likely to be greeted unfavourably by a tenant.”
Reflect the market
“Before implementing a rent increase it’s important to do your research so that you know that the increase is fair,” says Zoe Bywater, co-owner of Belvoir Bedford.
“Be mindful that you have to reflect the market in any increase implemented so it’s a good idea to compare and contrast similar rental properties, perhaps by an online search.
“Another valuable source of market knowledge would be your local letting agent. At Belvoir Bedford, for example, we regularly carry out an ‘MOT’ on our managed properties and part of this includes looking at its current rental value in comparison to others.
“A good agent will review a landlord’s portfolio on a regular basis, evaluating market conditions and following market forces so the rent rises by a fair amount.”
Be professional
“When approaching a tenant regarding a rent increase it’s important that you do so in a professional manner,” adds Katie. “Do your research and demonstrate that you’ve done your homework.
“Some private landlords may choose to talk to their tenant in advance of written confirmation. If resistance is met, being able to explain why you’re implementing the rise and giving other market examples can be valuable.
“A covering letter along with a Section 13 Notice should then be served. This is the official documentation to implement a rent increase.”
Stay on top of payments
“Missed payments don’t usually arise because of small rent increases but if a payment is ever late make sure you’re proactive,” continues Katie.
“In the first instance talk to the tenant. Delayed payments are often a genuine mistake or perhaps a bank error so you need to know why the missed payment has occurred. The next step would be to write to the tenant. Always be proactive and never let missed payments multiply until numerous payments are missed.”
Zoe agrees and adds: “It’s important to build a good relationship with your tenant so if they can’t make a payment they feel they can be honest with you before the issue escalates.
“The problem will not go away so it’s important that they don’t bury their head in the sand and that they are transparent, open and honest. In fact, with good communication there may be ways that the problem can be accommodated, perhaps by the implementation of a payment plan for a period of time or coming to a mutual agreement regarding the future of the tenancy.
“In general, though, small rent rises don’t tend to cause big problems,” she concludes. “If a rise is approached in the right way there’s no reason why rent shouldn’t be increased from time to time.
“As a society we accept that things increase in price. In fact, everything we pay for is significantly more expensive than it was for example 10 years ago… including the homes we live in.”
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