Last updated 1 second ago, view live on Reddit.
I'm a new landlord, and my current tenant’s lease is nearing its end. They’d like to renew, and the management company has asked me whether I’d like to increase the rent—and if so, by how much. They suggested raising it in line with CPI, which is currently 3.9%.
For context, the property is a riverfront flat in Kingston Upon Thames, with no mortgage. The tenants are paying £1,800 pcm, and I hadn’t really considered an increase since I’m quite happy with the rent and they’ve been great tenants. The inspection reports indicate they’ve kept the flat in excellent condition. That said, I do recognize that ground rents and service charges tend to rise over time.
I’d love to hear your thoughts on what would be a fair rent adjustment, if any.
If you are happy and they are happy don’t increase the rent
Thanks, I think that’s where I’m headed
If you don’t increase, then ask your agent to communicate with them, that there will be no increase at this time, as you are happy with how they are looking after it etc. however, if no increase continues for a few years, and the property falls well below the market rate, you may increase above the average 4%, however you would still endeavour to keep it below market rate for them. It won’t be nice for them to settle into the property for 2-3 years, not have an increase and think you’ve forgotten or something as there’s no communication, to suddenly be hit with a 10% increase.
It’s always your decision to raise rent or not. Even with a good solid tenant a small rise per year is sensible, to keep up with inflation, so that in 2/3/:/5yrs you don’t have to surprise your tenant with a large increase.
If you’re mortgaged you also need to consider how you will demonstrate to the bank you’re achieving market rate when it comes to renewal time or you may find mortgage deals harder to secure.
Why bother, if you're both happy with the arrangement as is? Is £70 a month worth potentially upsetting things? This feels like a situation where the management company is making work to justify its own existence.
If you're worried about ground rents and service charges growing with time, maybe it would be better to increase the rent by a factor more in line with your additional costs on that? Otherwise, it feels like CPIH (i.e. inflation including housing costs), which is slightly lower, at 3.7%, would be a better benchmark.
The management company operates on a fixed fee, so they wouldn’t gain anything from a rent increase, though I do feel they’re subtly pushing in that direction.
That said, I agree—I doubt I’ll be raising the rent. If I do, it would likely be in line with the increase in service charges, which seems more reasonable.
Does your agency enjoy a fee from renewing the tenancy though? If your tenants want the extra security, then sure, but don't let the agency drive this. It will convert to a rolling tenancy for free and you can raise the rent without drawing up a new AST.
I’m using Hello Neighbour—they don’t charge renewal fees and they take a fixed £90 per month for full management. We’re set to sign another 1-year fixed AST.
Sounds like a good move, and you sound like a decent chap(/ette) to view it that way!
Might be worth holding off on the new contract then.
It will default to a 1 month rolling anyway
sorry, but could you elaborate further?
If you are thinking of raising in line with service charge, that won't be possible straight away if you sign a new contract.
If they reach the end of their initial term, it will default to a 1 month rolling contract anyway 2 months notice for s21, 1 month for them.
But you have the flexibility to raise the rent "earlier".
Eg if you sign them on for 1 year, then resign them for 6 months, you won't be able to raise rent until at least 18 months (might even be a year from the newest contract, I don't know...).
However if you let it default to a rolling after the first 12 then you could raise the rent at any point.
That's nice. Mine is a % but still much lower than ANY other i've looked at in the double digits.
Although if £70 a month is what was being planned and you dont increase rent but everything else around is £70 more such as insurance, gas checks as they all seem to go up yearly then you are effectively £70 down a month. I'm not one to put my rent up mid tenancy but if I look over the yearly inflation around my expenses then eventually it might start to be needed. Having said that isn't rent reform trying to push towards a yearly rise with the interest like broadband firms do?
100%, everything goes up, so no point keeping the rent the same, then when you're faced with increased inflation during a period like covid you have a lot of catching up to do to reach market rates. It harder to do 5 years worth of rent increase in one go than to increase a small amount each year.
I have several flats that I'm letting out and many mortgage payments, if for example I don't have a cash reserve at any given point that I could fall back on for my payments... I could be put in a difficult position, as we know anything can happen e.g. a global pandemic.
I'm not saying charge above market rates but it should be at least market rates. Just for risk purposes.
If you're not at market rate, you have catching up to do with such high inflation.
You could have emergency maintenance and repair costs, vacant property for a long period and many other expenses like insurance, gas/electrical/boiler inspection.
Everyone's situation is different of course, you may already have a cash reserve or your tenant themselves might carry out some works on the property, just evaluate each scenario as it is. But increasing rent by inflation annually is usual practice.
When I had excellent tenants, I didn't increase the rent and instead fixed the tenancy and rent for another 12 months to keep them in. Good tenants can be hard to find and it is likely that you would lose more money with the vacancy period between tenancies, agency tenant find fees, or repairs the new tenants demanded before moving in, than you'd gain from the increase in rent.
Good point, hadn’t thought of that
I have not increased rent in years. My tenants are all decent, let me know if problems so I can address them before they get worse, are reasonable with repair times.
Why risk an empty property and new contract, checks and fees for a little extra? Too risky.
Yeah, I’d much prefer keeping them there tbh, great tenants
You sound like a great landlord. Don't do a rolling contract, that's no security for your great tenants. Consider managing the property yourself, the money you'd save would be more than £70.
If you want to keep them and you have little to no costs be a good landlord and don't increase.
I think I’ll do that
I would say yes, increase the rent even if it’s only by a notional amount. The problem with not raising it is that you then set expectations; and 4 or 5 years later if they are still there, you find that your rent is massively lower than market rate, and you need to whack it up by 40% to put things straight, and unsurprisingly the tenant kicks off.
I put mine up by a nominal sum; but still keep the rent below average; I use a form of words like “… the rent will increase to £xxx with effect on yyy; this represents a modest zzz% uplift over the year and I hope you will agree, if you look at Rightmove, that this is still very much on the low side for comparable properties in the area.”
Remember that at the end of the day you are running a business. But if you are adamant about not increasing the rent, then at least email the tenant and tell them you have “reviewed the rent and are pleased to say you can maintain the current rate for the next 12 months” or something.
You make some great points. I do need to make money, and I don’t want to end up with rent below market value, but, as others have mentioned, I’d prefer to be cautious so I don’t risk losing these good tenants. They’re paying above market rate for the area and have been excellent tenants.
Maybe I’ll skip a rent increase for this year and adjust it next time, or find another approach that avoids increasing rent every single year. The peace of mind of having great tenants is worth more to me than raising the rent every year.
Since there’s no mortgage on the property, I’m not under financial pressure, so I’m okay with a small loss if it means keeping reliable tenants and avoiding the hassle and costs of finding new ones.
What do you think?
Valid and Smart.
It might be the agency trying to get additional money from you - you’ll have to pay them for drawing a new contract, whereas without the increase you can safely let it go to rolling contract
Maybe. But despite what the agent will try to say, there’s no need for a new contract, regardless of whether the rent is increasing. The tenancy can go ‘periodic’ ( ie month to month), and providing the tenant is agreeable to it, a simple email will suffice if you want to increase the rent. (If they were to object, you’d need to serve a Section 13 notice).
If you're happy, then leave it as is. No obligation to.
B mindful of the big picture though. You could fall quite far behind in a few years, so it is worth keeping an eye on the market and putting some slow and steady increases.
Yeah, taking it slow sounds like the smarter move. I’ll probably skip the increase this year and decide later whether to raise it next time.
Yeh absolutely - if they've been in for a year, then get a single increase of about 6% in sure they'll be happy enough with that.
I've had someone in for a bit over a year, and I'm not increasing the rent.
I need to find the time to head over for an inspection anyway (like to do one post winter season to check over for any evidence of leaks, condition of the roof/brickwork etc) and I'm going to mention it then.
If you are set on not increasing it, do mention it to them for their peace of mind.
I don’t raise rents ever. The amount the pay on day 1, was a the amount they pay when they leave. I invest the rent I receive, that’s where my returns grow. Give your tenants financial autonomy.
(Only exception would be… if they continually broke stuff)
I rent out one flat - which I would sell if I could so count as an accidental landlord.
I made the choice a long time ago that I would only increase the rent when I had a change of tenant. I cant stress enough how valuable it is to have a happy tenant in the property. Having a good relationship with them means they are more likely to look after the place and stay longer.
If I had increased the rent along with inflation, I could have 10% more income - maybe higher, but if my tenant decides to move out, I will have to pay for new marketing / contract / time with the flat empty. and that would likely wipe out any increase I made.
Rent covers the mortgage on my property, as long as that's the case going forward, I'm just not interested in squeezing the tenant for all they are worth.
If I get good tenants I tend to leave it, then when they move out, up it to market rate. Finding new tenants can be expensive and risky.
> I’m quite happy with the rent and they’ve been great tenants
What more do you need then?!
To answer your initial question, no, it's not necessary to increase the rent every year.
If you're happy with the tenants, happy with what they are paying, and don't have any mortgage costs to worry about the question to consider is whether you want to risk losing your great tenants for the sake of £70 more per month. Yes, you could be £70 per month up, but you could also very quickly be £1800 per month down if the tenants decide they can't afford the increase and move out, leaving you with an empty property until you find someone to replace them.
Personally, I've only ever increased rent with a tenant in situ once. The tenant was a pain anyway, and I wasn't disappointed to see them move out!
One thing to keep in mind is that it seems widely accepted that tenants prefer small annual increases over a larger increase after, for example, 5+ years, even if the large increase would do no more than bring the rent in line with what it would have been if you had used gradual yearly increases. It's the sudden shock to their budget that causes problems. If you forego an increase this year and any following year, don't then expect the tenants to be happy with a large increase at a later date just because you'd chosen not to ask for small increases beforehand.
My last landlord (before I moved out and bought) was excellent. This was a few years back now, and my rent in the first year was £800 per month. In year two, it jumped up to £900, which they didn't really want to do but felt pressured by the agents. Anyway, I happily paid the £900. I left after that year, and when they returned my deposit, they also returned the £100 overpayment for the last 12 months as a thank you for looking after their property, which was a welcome bonus when moving into my own place. Not saying you should do this as this was a different situation completely, but a good tenant is hard to find and there's no guarantee that if they left, you'd get someone half as good..
tbh i did it a little only £50. reason being i want it to be around market value and i dont want my tenants to dig their heels in and not leave ebcause its cheap, if i ever need to vacate the property which is what i am intending to do soon
No, it's not necessary many people pay the same rent for decades, depending on the mortgage - or not. The current rental income may be more than enough to pay for the mortgage (if any) and any agent's fees and maintenance plus provide the LL a good profit.
I would argue yes, and think it to some inflation index. I personally use RPI, which means in real terms I receive the same value of money year on year. The reason for the increase if that if you were to have a tenant for 5 year with zero increase, the X amount or rent you receive would be worth less in year 5 in terms of year 1 in regards to purchasing power.
Is it necessary? No. The rent won't change unless your tenancy agreement has an automatic increase.
If you're happy as things are, then you don't have to make a change if you're not forced to. I've left rents unchanged in the past with good tenants.
Your ground rent will be set out in the leasehold, so that will be predictable. Service charges, less so.
One thing you might want to be mindful of is allowing the rent to fall too far out of line with the market. I've had agents tell me that this can cause problems for tenants as, if they want to move to something larger, they might find the jump in rent to be somewhat of a shock.
We tend to keep the rent fixed for good tenants in the hope that they stay on and we don't have a void period or have to pay to advertise and do checks on new tenants.
That said, we had some tenants stay for 5 years and by the end, they were getting a very good deal and by that point, it would have been too much of an increase to bring it in line with market rates so there's a bit of a risk.
If your tenants are good, I don't see any reason to bump the price up every year. Tho 100% of agents will recommend this and push you into "market rate' which is a horrible cycle of every cunt putting their prices up every year because everyone else is.
For this reason, I generally will not increase rents on good tenants and only look at changing the price when new tenants come in.
Most of my properties are large family homes for people planning to own, so typically they are only staying 2-3 years max, so I'm usually comfortable holding rents for that period of time. If I ever get someone staying for 5+ years and there's significant increases to my own costs, then I would have to bring them in line.
No increase = happy tenants
Not necessarily. Usually indexed to inflation, so it's negligible to me. However, tenant is moving out next month, so can start with it higher.
Private landlord of a single property here. At the suggestion of the letting agent, I did put the rent up by about 3% when the term renewed. My costs increase - I do regular maintenance on the house, so a small increase seemed justifiable. However watch out - I realised today (pulling together info for self assessment) that the agent charged me £125 for the privilege of putting up the rent!
If I got good tenants, I leave this as status quo. I’m happy they’re happy, not going to create work for myself if they respect the property and each others time. I personally only change price when remarketing the property. I also fix my lending costs out to hedge against interest rate swings.
I have found that the turnover fits the rent changes, never had anyone stay beyond 5 years yet though. And the HMO is much easier to reprice here and there as turnover is generally higher.
Do not increase if your happy and they are, no need to
Only tend to adjust to the market rate generally speaking when new tenants move in. Very occasionally I have increased (<10%) for sitting tenants if they've been in a 5 years to close the gap a little.