Hello readers,
The Renters’ Rights Act is now in force and something I have been receiving a lot of questions about is how landlords should now go about increasing their rents, because with fixed term tenancies now replaced with periodic tenancies you cannot rely on an annual ‘renewal’ point.
This is a key point because with costs and legislation increasing, landlords will want to make sure their rent remains at the right level to maintain a level of profitability.
In this short article, I will cover off what a Section 13 notice is, some key rules landlords need to follow and then how to prepare and serve the notice along with what happens next.
What is a Section 13 notice?
Simply put, a section 13 notice is the formal way that landlords in England must use to propose a rent increase.
If tenancy agreements have any other rent review clause in, that has now been superseded and the only legitimate method is via the new Form 4A.
Some key rules landlords need to follow when serving a Section 13 notice
There are a couple of things that landlords need to think about before filling in Form 4A and these are:
- Whether rent has increased over the past 12 months – Under the Renters’ Rights Act, landlords cannot increase rents more than once within a 12-month period. This includes any formal or informal increases
- Making sure the notice period is two months – This is a change from the previous one month requirement
- The new rent must start on the right date – This means that rent must take effect on the same day of the month the tenancy started, not some arbitrary date. For example, if the tenancy started on the 3rd of the month, the new rent must start on the 3rd of the month
- Make sure the rent increase is within market rates – Because it is now easier for tenants to challenge rent increases, landlords will need to ensure that any increase reflects the market rent. If a tenant challenges the increase, the tribunal may determine that the market rent is lower than the amount proposed by the landlord, which could result in a reduced increase following what can often be a lengthy process
How landlords should prepare and serve a Section 13 notice
The only valid way to carry out a rent increase is now through Form 4A, which you can download here. This form needs to be completed in full and I recommend that landlords take extra care when completing the fields to make sure there are no errors.
When the form is completed, it needs to be served and getting this right is as crucial as completing the form itself. Landlords can serve a Section 13 notice in one of three ways:
- In person – By handing it directly to the tenant
- By post – My advice here is to send by recorded delivery and make sure there are extra days allowed for the delivery time
- By email – A Section 13 notice can only be served by email if the tenancy agreement specifically allows it
The key thing here is to maintain a good record of how and when the notice was served, so if it’s ever challenged you can demonstrate it was validly served.
What happens after a Section 13 notice is served?
Once the notice is served, provided it’s not challenges the tenant should simply pay the increased rent.
Tenants do, however, have the right to challenge a proposed increase (as they always have had) by applying to the First tier Tribunal (Property Chamber) before the notice expires.
The job of the tribunal would then be to determine the market rent for the property, and whatever they decide becomes the maximum lawful rent you can charge. The process costs the tenant £47, however it can be somewhat lengthy and my advice is to have a proactive conversation with tenants before serving the notice so all parties are in agreement already and the notice is just a tickbox exercise.
Final advice to landlords
Only time will tell how this process works and how many rent increases are challenged through the courts. It will be interesting to look back over the next few years to assess any increases and subsequent delays.
In my view, however, provided landlords have maintained the property well and had a conversation with tenants about local comparables before serving the notice then there is nothing to be concerned about.
I’d certainly be interested to hear if you had any other thoughts on this! You can email me on hasan@home-share.co.uk and I’ll be happy to help.
Hasan