FUTURE PROOF YOUR INVESTMENT NOW; GET AHEAD OF THE RENTERS REFORM BILL
With the renters reform bill looming due to political changes, the climate could vastly change when it comes to landlords being able to increase their rent during a tenancy. Read the article on how to stay ahead and act now before it's too late.
The impending enactment of the Renters Reform Bill in the UK is poised to introduce significant changes to the rental market, particularly concerning the relationship between landlords and tenants. One of the most notable reforms is the abolition of fixed-term tenancies, which will undoubtedly impact how landlords manage their properties and, importantly, how they approach rent increases. With these changes on the horizon, it's crucial for landlords to understand the implications and prepare accordingly to safeguard their investments while adhering to the new regulations.
Understanding the Renters Reform Bill
The Renters Reform Bill aims to create a fairer, more secure, and more stable rental sector. The abolition of fixed-term tenancies means that all rentals will automatically default to periodic tenancies, giving tenants greater flexibility and security. While this is a positive step for renters, it introduces challenges for landlords, particularly around the process of increasing rent.
The Impact on Rent Increases
Under the new system, landlords will find it more challenging to increase rents. With the removal of the opportunity to renegotiate rental terms at the end of a fixed-term lease, landlords must be more strategic about setting and adjusting rent. It's essential to ensure that the initial rent is set at a market-reflective rate that also covers the costs of property maintenance and mortgage repayments where applicable.
New single procedure to increase rent in the Renters Reform Bill
The Renters Reform Bill proposes introducing a single way of increasing rent with the following new procedure:
- To increase the rent, a landlord will need to complete a revised Section 13 form, which will be published on GOV.UK, and serve it on the tenant with 2 months’ notice.
- If the tenant accepts the proposed rent increase, the rent will change on the rent day after expiry of the notice.
- If the tenant doesn’t agree with the increase and think it’s above the market rate, they can dispute the increase through referring a case to the First-tier Tribunal. They will need to do this before the new rent is due and let their landlord know.
- As things stand we do no know any time frames for this process but we believe it could well take a number of months.
- Landlords will only be able to increase rents once a year.
The government will issue guidance “to make sure it is clear for everyone”. The press releases stress that landlords will still be able to increase rents to the market rent. There’s no cap on the amount of the increase. That said, tenants will be able to challenge increases above the market, as they can now.
Steps Landlords Should Take Now
1. Review Your Rent Strategy before it’s too late: Assess your current rent levels in comparison to the market to ensure they are competitive yet fair. This is even more critical if you have a mortgage on the property. We advise clients to speak with their mortgage brokers and tax advisors (we are happy to recommend one if needed) to fully understand the likely monthly costs of ownership and the implications for their tax bill.
2. Consider future costs and how inflation might impact your expenses and, consequently, the rent you need to charge to maintain a profitable investment.
3. Understand the New Legislation: Familiarize yourself with the specifics of the Renters Reform Bill, focusing on the procedures for rent increases. Understanding your legal obligations and the rights of your tenants is crucial.
4. Improve Tenant Relations: Establishing a good relationship with your tenants can make discussions about rent adjustments smoother. Transparent communication about costs and necessary increases can help in maintaining a positive landlord-tenant relationship.
5. Invest in Your Property: Ensuring your property is well-maintained and possibly upgraded can justify higher rent while making it more attractive to potential tenants. Consider energy-efficient improvements or cosmetic upgrades to enhance value.
6. Professional Advice: It may be beneficial to seek advice from a property management professional or legal advisor to navigate the changes effectively. They can offer insights into best practices and ensure you comply with the new laws.
Doing What is Right for Your Investment
The changes brought about by the Renters Reform Bill emphasize the need for landlords to be proactive in managing their properties and investments. By taking steps now to align with the upcoming regulations, landlords can ensure they remain competitive in the market while providing fair and secure housing for tenants. It's about balancing the scales between making a reasonable return on investment and adhering to the principles of fairness and security that the bill promotes. As the implementation of the bill approaches, the mantra for landlords should be preparation and adaptation, ensuring they can navigate the new landscape effectively while safeguarding their investments.
GLP Managed Clients:
If you are a managed client, don't worry, we have you covered! Our management team are on the ball ensuring that top rents are achieved, no rent increase is being missed and each property stays fully compliant.
Get In Touch:
We will be calling around our landlords in the coming weeks to ensure that everyone is achieving the best rent, helping them check tenancy agreements to see whether they have a right to increase the rent and when.
But if you can't wait for us to contact you, contact us today to find out how much your home is worth in the current market.
Let's future proof our landlord's businesses together!
Becky - Lettings Manager
(Soho, Covent Garden, Marylebone, Mayfair, Belgravia, Victoria and West End)
0207 734 4062
Megan - Lettings Director
(Bloomsbury, Kings Cross, Fitzrovia, Hyde Park, North Marylebone, St John's Wood, Camden)
0207 113 1066