The Renters’ Rights Bill will introduce sweeping reforms to the private rental sector, with significant implications for landlords, including changes to how rent increases can be implemented.
Section 13 is now central to any rent review process. Landlords must understand the new requirements to make sure they are compliant and to maintain positive relationships with tenants.
Under the new system, all existing fixed-term tenancies will convert into periodic tenancies once the Renters’ Rights Bill comes into effect. Section 13 will therefore become the primary mechanism for adjusting rent, since there will be no renewal negotiations tied to the end of a fixed term.
What Is a Section 13 Notice?
Section 13 of the Housing Act 1988 allows landlords to propose rent increases in periodic tenancies. Once the Renters’ Rights Bill takes effect and fixed terms fall away, Section 13 will become the primary method for reviewing and increasing rent.
Once a tenancy becomes periodic under the new system, rent changes must be made through the Section 13 process, rather than informal negotiation or renewal discussions.
Key Requirements for Serving a Section 13 Notice as proposed in the new legislation
- Notice Period: Landlords must provide tenants with a minimum of two month’s notice before the proposed increase takes effect.
- Frequency of Rent Increases: Rent can only be increased once every 12 months, even if the original tenancy agreement allows for more frequent reviews.
- Rent Evidence: The notice must be backed by evidence of comparable rents in the area. Evidence must show comparable rents for similar properties. Asking rents on portals can be misleading, so caution is needed when relying on them.
- Limitations on Negotiation: Once a Section 13 notice is served, landlords can only agree to a lower rent than the proposed amount - not a higher one. This rule aims to protect tenants from undue pressure.
Why Advertised Rents Are Key
With landlords restricted to serving Section 13 notices for rent increases, the market dynamics are shifting.
Previously, landlords and agents could negotiate directly with tenants about any amount at any time. Now, rent reviews are likely to be based on advertised market rents. This creates a knock-on effect:
- Higher Advertised Rents: To safeguard against challenges of bidding wars, landlords may advertise properties at higher asking rents, which could distort the market.
- Evidence for Tribunal: If tenants contest the proposed increase, the landlord must justify the new rent to a tribunal with concrete evidence and the tribunals may quickly realise the portal asking rents are higher than actual agreed rents.
Navigating Section 13 Challenges
To ensure smooth rent increases under Section 13:
- Communicate Early: Notify tenants of potential rent increases well before serving a Section 13 notice. Use this time to explain the reasoning behind the adjustment, such as rising mortgage rates or maintenance costs.
- Prepare Evidence: Gather detailed evidence of comparable rents. This includes not only asking rents but also achieved rents wherever possible.
- Negotiate Post-Notice: Section 13 notices will now become the starting point for negotiation. Be open to discussions with tenants to reach a fair agreement.
- Avoid unnecessary renewals where possible: Renewing a tenancy resets the clock, delaying when a Section 13 increase can be served once the tenancy becomes periodic.
The Tenant's Right to Contest
Tenants have the right to challenge a Section 13 notice at a First-Tier Tribunal if they believe the proposed rent is excessive. This means landlords must:
- Be prepared to defend the proposed rent with robust evidence.
- Make sure all paperwork is error-free - any mistake can render the notice invalid.
Where Section 13 is challenged, the tribunal will assess the rent based on evidence of comparable local rents rather than advertised figures.
How Rocket Property Management Can Help
At Rocket Property Management, we provide expert guidance on rent reviews. We make sure our landlords remain compliant with Section 13 requirements while maximising rental returns.
From gathering market evidence to managing tenant negotiations, our team is here to make the process hassle-free. So, if you need any advice, get in touch.
These processes are based on the current draft of the Renters’ Rights Bill and may be refined once final regulations are issued.
