A comprehensive overview of Section 13 and rent increases within the private rented sector
Currently, this is the process by which landlords and agents can raise rents, and here's how it will function under the Renters (Reform) Bill.
Currently, this is the process by which landlords and agents can raise rents, and here's how it will function under the Renters (Reform) Bill.
Landlords have the option to raise rent for any recurring tenancies by utilising Section 13 of the Housing Act (1988). The Renters (Reform) Bill will substitute a method for this notice that will mimic the current procedure under the new tenancy system. Here is a summary of the current situation and how the Renters (Reform) Bill would affect rent increases.
What are the current methods for private landlords to increase rents in a tenancy?
Landlords have the following options to increase rents in a tenancy:
- Including a "rent review clause" in an Assured Shorthold Tenancy agreement, which specifies the conditions for rent increases. This clause typically outlines the timing of reviews, the permissible amount of increase, and the notice period required from the landlord
- At the conclusion of a fixed-term tenancy, rents can be raised by entering into a new fixed-term contract
- Landlords and tenants can mutually agree on a rent increase during the tenancy, and it is advisable for both parties to maintain a written record of this agreement
- If the fixed-term transitions to a periodic tenancy at the end of its term, or if the tenancy is initially agreed upon on a periodic basis, landlords must employ a "Landlord's notice proposing a new rent" form (Section 13) to implement a rent increase. This form necessitates a minimum one-month notice period
- Rent increases should be deemed "fair and realistic," aligning with local market rates
Please note that the above information is based on current practices, and the regulations may differ under the Renters (Reform) Bill.
When is it appropriate to use a Section 13 notice?
A Section 13 notice cannot be employed during the initial year (52 weeks) of a periodic tenancy, even if it is a fixed-term tenancy that transitions into a periodic tenancy. The commencement date of the initial fixed-term tenancy sets the starting point for this restriction.
Furthermore, a Section 13 notice cannot be used if there is an existing rent review clause in effect. However, if the fixed-term tenancy converts to a periodic tenancy at the end of its term, the rent review clause becomes void, allowing the use of Section 13.
Similarly, landlords have the option to serve a Section 13 notice during a fixed-term tenancy, but rent increases cannot take effect until after the term has concluded.
It is important to note that this process allows for rent increases only once per year.
Is it possible for a tenant to challenge a Section 13 notice regarding a rent increase?
Tenants have the right to dispute a rent increase by approaching the First-tier Property Tribunal if they believe the proposed increase is unjust. However, it is advisable for them to initially communicate their concerns with the landlord and clarify their objections.
In cases where an agreement cannot be reached through negotiation, the tribunal can intervene to establish a new rent for the tenancy. It is important to note that the tribunal's decision may result in a rent that is either higher or lower than the initially requested amount by the landlord.
What changes can be expected regarding rent increases under the Renters (Reform) Bill?
With the implementation of the new tenancy system, all tenancies, barring certain exceptions, will transition to periodic tenancies. Consequently, a mechanism similar to Section 13 will become the sole method for landlords and agents to raise rents.
The notice period for landlords to inform tenants about a rent increase will be extended to two months, doubling the current requirement. Additionally, landlords will continue to have the ability to increase rents once per year using this process.
The government will introduce a straightforward form that landlords and agents must complete and serve to tenants in order to propose a rent increase.
Upon receiving the form, tenants will simply need to accept the specified amount by paying the revised rent.
If tenants wish to contest the proposed amount, they will still have the option to do so through the First-tier Tribunal. However, they must initiate this process prior to the date when the new rent amount becomes effective and payment is due.
Stay connected - Get market updates and property news straight to your inbox!
If you have any questions, get in touch and speak to a knowledgeable member of the team.