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.
What Is a Section 13 Notice?
Section 13 of the Housing Act 1988 allows landlords to propose rent increases for periodic tenancies but most rent reviews are currently negotiated without the use of section 13. Under the new legislation, the process is more structured, requiring a formal section 13 notice to be served for all rent reviews.
Most importantly, landlords cannot negotiate rent increases informally or outside the Section 13 framework.
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. This can include listings from platforms like Rightmove, but landlords must be cautious, as asking rents may not reflect realistic market values.
- 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.
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.
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.
