How to increase rent without losing tenants

December 18, 2019

As a landlord, it’s important to think of your properties as assets and adopt a business mindset when dealing with tenants. Whether you have one property in your portfolio or one hundred, managing rents can be tough, especially if you operate in a competitive market.

Oversaturation in the rental market and rising costs, including the recent Tenant Fee Ban, has left landlords across the UK squeezed. And as time marches on, costs increase, and so it’s only fair you increase rents to reflect this and ensure your properties generate a return.

But how can you increase rents without losing tenants? Below, we’ve put together a guide to raising rents to give you some food for thought and ensure you make the right decision… 


When can you legally increase rents?

Before you consider raising rents, it’s important you know whether you can.

For fixed-term tenancy agreements, you cannot legally increase the rent until the end of the tenancy, unless there’s a clause in the agreement that permits a hike. Check to see how long your tenants have left in their current agreement and consider raising their rents at the end of their current tenancy, whether they sign up for another year or move to a rolling contract.

For periodic tenancies, you can only increase the rent once per year, and the increase must be agreed with your tenant. They must also be given at least one month’s notice. You should inform them of your intentions and ask them to agree in writing. Then, you can issue a new rent form with the new rent. If they don’t agree, you’ll need to look for a new tenant instead.

If you want to protect yourself and give tenants more notice, consider adding a clause to their next tenancy agreement that states that the rent will increase every six months or every year, in line with inflation or a percentage. That way, both parties will know where they stand.


Why should you increase the rent?


  • Maintenance costs: All rental properties require maintenance from time to time, but if your property maintenance costs are increasing, or you’re renovating the property, then you might decide to pass some of these costs onto your tenants via their rent.
  • Increased costs: Whether it’s the Tenant Fee Ban, increasing mortgage rates, new legislation, changing property management companies or increased administration, you might decide to increase rents across the board to ensure you don’t lose money.
  • Rising rents/demand: Keep an eye on market prices and decide whether your rent is competitive. If similar properties are being let for much more than yours, it might be time to receive a new valuation from an estate agent and increase rents accordingly.


Why shouldn’t you increase the rent?

  • You want to earn more: Though all landlords want to make money and generate a return on their investment, increasing rent just to make more money is a bad idea. Rent increases that are unjustified will encourage tenants to leave and make it harder for you to find new ones; it could also encourage tenants to dispute increases.
  • For the sake of it: There’s no reason why you can’t charge your tenant the same rent for ten years provided you’re covering costs and generating a return. Putting up rents for the sake of it is a bad idea; you risk losing loyal tenants and could leave your properties sitting empty. Be reasonable and only increase when necessary.


Telling tenants about a rent hike

Nobody wants their household bills to increase, so dealing with a rent hike sensitively is key.

Landlords must follow strict rules when increasing rents and give tenants notice, or they could face prosecution. When you get to the end of a fixed-term tenancy, introduce your new monthly rent and make sure that your tenants agree before they sign up. If you’re changing your prices mid-tenancy, use a Notice to Propose a New Rent form and ensure they agree.

We recommend informing tenants of price increases in writing, and offering an explanation where possible. Your tenants will be much more sympathetic if they know you’re increasing rents to cover costs rather than to buy yourself a new car or go on holiday. The more open and transparent you can be, the less likely you are to run into disputes with your tenants.

Give tenants at least two months’ notice before any price increases so they have time to budget. And if they decide not to renew their tenancy, you’ll have time to find a new tenant.


Other ways to increase property revenue

If you’re not making enough from your property but you don’t want to risk losing a loyal tenant, consider other methods of increasing revenue. Switch to a cheaper mortgage provider or do your own property management rather than outsourcing to a specialist.

Administration fees can often swallow 10% to 20% of your monthly rental income, so consider managing admin yourself. Set up an email address and phone line, be responsive to your tenants and let them pay via Direct Debit using a service such as GoCardless.

And finally, consider add-on services that can deliver more value to your tenants without increasing your costs. At Billing Better, for example, we allow landlords and lettings agents to offer their tenants an “all-inclusive” package that covers all of their household bills for one monthly fee, and we pay landlords £20 per property per month for every tenant they sign up.


Though price hikes are never positive, there are ways you can reduce the pain and make it easier for your tenants to swallow. Do you have any other advice? Let us know on LinkedIn and check back to the blog soon for more tips and tricks on being a successful landlord.

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