Managing rent increases fairly and effectively

Rental income adjustments form a natural part of property investment, reflecting changing market conditions, inflation, and property improvements. However, rent increases require careful handling to maintain tenant relationships, comply with legal requirements, and ensure changes are both fair and sustainable. Understanding the proper approach protects your interests whilst respecting tenant rights.

Understand legal requirements and limitations

You cannot increase rent arbitrarily or whenever you wish. For periodic tenancies, you must provide a minimum of one month’s notice for monthly tenancies or notice equivalent to the rental period for longer terms. For fixed-term tenancies, rent can only be increased if the agreement includes a rent review clause, or when the fixed term ends and converts to a periodic tenancy.

The notice must use the correct legal form, a Section 13 notice for assured shorthold tenancies. Informal notifications have no legal standing. If tenants disagree with proposed increases, they can challenge them through the First-tier Tribunal, which will determine a fair market rent for the property.

You cannot use rent increases as retaliation against tenants who have complained about disrepair or exercised their legal rights. Retaliatory increases are illegal and can result in penalties.

Research market rates thoroughly

Before proposing any increase, research current market rents for comparable properties in your area. Check online listings, speak with local letting agents, and review recent lettings data. Increases should align with market conditions, proposing rents significantly above comparable properties invites challenges and potential tribunal referrals.

Consider your property’s specific features, condition, and location within the wider area. Properties with recent improvements, better condition, or superior positioning can justify premium rents, whilst those needing attention should reflect this in pricing.

Document your research. If tenants question the increase, demonstrating that it is based on objective market analysis rather than arbitrary decisions strengthens your position and encourages constructive discussion.

Time increases strategically

Avoid increasing rent during difficult personal circumstances for tenants when you are aware of them, or immediately after tenants have reported maintenance issues. Poor timing creates negative associations and damages relationships even when increases are justified.

Consider seasonal factors. Proposing increases during winter, when moving is more difficult and rental supply often increases, can feel opportunistic. Spring and early summer, when rental markets are more active, tend to create fairer conditions for rent reviews.

Space increases reasonably. Annual reviews align with inflation cycles and allow tenants time to adjust budgets. More frequent increases, even if modest, create instability and encourage tenants to seek alternative accommodation.

Communicate clearly and professionally

Provide proper notice periods, ideally exceeding legal minimums. Giving two months’ notice where only one month is required demonstrates consideration and allows tenants adequate time to plan.

Explain your reasoning clearly. Reference market research, property improvements you have made, or rising management costs. Tenants respond more positively to justified increases supported by clear rationale than unexplained demands.

Present increases in context. For example, a £50 increase on £1,000 rent equates to 5%. Referencing how long rent has remained unchanged and how this compares with wider inflation or market trends helps tenants understand the adjustment.

Consider tenant circumstances

Long-term, reliable tenants who care for the property and pay consistently are valuable assets. Losing good tenants to chase maximum market rent often costs more through void periods, re-letting expenses, and the risk of unsuitable replacements.

For excellent tenants, a slightly below-market increase that retains them can deliver better long-term returns than a maximum increase that triggers a departure.

Offer value alongside increases

If proposing a significant increase, consider what additional value you can offer. This might include completing requested improvements, including services previously charged separately, or offering longer tenancy terms that provide greater security.

These gestures show tenants that the increase reflects improved value rather than simply maximising income.

Handle negotiations professionally

If tenants wish to discuss the increase, engage constructively. Listen to concerns, consider reasonable adjustments, and negotiate in good faith. Phasing increases or adjusting implementation timing can help tenants adapt whilst still meeting your objectives.

Document everything

Use the correct legal forms, keep copies of all notices and correspondence, and record service dates accurately. Comprehensive records protect your position if disputes arise.

Contact us for market analysis and guidance on fair rent positioning