With mortgage rates still high, should I push through a rent increase for my existing tenants, and if so, what's a 'fair' amount and how do I officially serve notice without upsetting them too much?
Quick Answer
Rising mortgage rates (currently 5.0-6.5%) and Section 24 costs often necessitate rent reviews. Any increase should align with local market rates, giving proper notice (e.g., Section 13 for statutory increases).
## Rent Review Strategies for a Stronger Portfolio
When considering a rent increase for existing tenants, it is crucial to understand the current regulatory environment. As of 1 May 2026, Section 21 'no-fault' evictions have been abolished in England under the Renters' Rights Act 2025. This fundamentally shifts the landlord-tenant dynamic, placing a greater emphasis on maintaining good relationships and using new possession grounds if necessary. Therefore, any rent review strategy must be approached with this in mind, focusing on clear communication and justification.
### How Do I Officially Serve Notice for a Rent Increase?
Formally serving notice for a rent increase depends on the tenancy agreement type. For an Assured Shorthold Tenancy (AST) with a fixed term, rent cannot be increased until the fixed term ends unless there's a specific rent review clause in the agreement. If the fixed term has ended and the tenancy is now a periodic (rolling) tenancy, landlords must provide a minimum of one month's notice for weekly or monthly tenancies, or six months' notice if the rent is paid yearly. This notice must be in writing, usually using a Section 13 notice (Form 4), which is served to the tenant. The new rent cannot begin until at least 12 months after the initial tenancy started or since the last rent increase.
### What's Considered a 'Fair' Rent Increase?
There is no legal definition of a 'fair' amount, but a reasonable increase generally aligns with current market rates for comparable properties in the area. Landlords should research local rents on property portals and local letting agent listings. Factors to consider include any improvements made to the property, the current Bank of England base rate of 3.75% impacting mortgage costs, and general inflation. An increase of between 5% and 10% is often seen as justifiable if supported by market evidence and increased operational costs. For example, a property currently renting for £1,000 per month seeing a 7% increase would move to £1,070, adding £840 to annual income.
### Does This Affect All Existing Tenancies?
Rent increase regulations apply differently based on the type of tenancy agreement in place. Fixed-term ASTs cannot have rent increased mid-term unless the contract explicitly allows for it through a rent review clause. Once the fixed term expires and the tenancy becomes periodic, or if it was periodic from the outset, rent can be increased by giving proper notice. Regulated tenancies (pre-1989) have specific rules for rent officers to determine fair rent. Holiday lets or non-residential agreements fall outside these residential tenancy regulations.
### What Factors Should I Consider Before Raising Rent?
Before implementing an increase, evaluate current market demand for your property type and location. High demand might support a larger increase, while low demand could risk vacancy. Assess the existing tenant's payment history and how well they maintain the property; a reliable tenant may be worth retaining with a slightly smaller increase. Calculate your increased operating costs, including mortgage interest (which is no longer a deductible expense for individual landlords under Section 24, instead qualifying for a 20% tax credit on finance costs), insurance, and maintenance. Consider the property's Energy Performance Certificate (EPC) rating; properties needing upgrades to meet the C-equivalent by 1 October 2030 might warrant a more gradual approach to rent increases to manage potential future capital expenditure. If your current rental income is £1,200 per month and your mortgage interest payment has increased by £150 per month, a 10% rent increase to £1,320 per month would help cover this increased cost, providing an extra £120. Another scenario involves a landlord needing to undertake a significant EPC upgrade; they might choose a smaller rent increase, such as 3%, to £1,236 per month, demonstrating goodwill before potentially incurring a £10,000 cost cap for compliance.
## Smart Strategies for Rent Reviews
* **Market Research:** Regularly check local rental listings to ensure your rent aligns with comparable properties. A property in a popular area, such as Bristol, where similar 2-bedroom flats let for £1,200, should be reviewed against your current £1,050 rent.
* **Communication is Key:** Openly discuss rent changes with tenants, explaining the reasons, such as rising operational costs or market adjustments, before serving formal notice. This can minimise friction.
* **Tenant Retention:** Consider the value of a good tenant; a slight compromise on the rent increase might save you the costs and void periods associated with finding a new tenant, which can easily be a month's rent plus agent fees.
## Pitfalls to Avoid with Rent Increases
* **Ignoring Notice Periods:** Failing to serve correct notice (e.g., using a Section 13 notice or equivalent written communication) can render the increase invalid and cause disputes. The minimum notice period is one month for monthly tenancies.
* **Over-inflating Rent:** Setting rent significantly above market value can lead to extended void periods, making the property harder to let and eroding overall profitability.
* **Poor Communication:** Surprising tenants with a formal notice without prior discussion can damage relationships and increase the likelihood of them seeking alternative accommodation, especially now that Section 21 is abolished.
## Investor Rule of Thumb
Align rent increases with market realities and operational costs, always prioritising clear communication and proper legal procedure to protect your cash flow and tenant relationships.
## What This Means For You
Navigating rent increases requires a strategic approach, especially with the abolition of Section 21 evictions making tenant retention more vital than ever. You need to ensure your rent is competitive, covers your increased costs, and is communicated effectively to maintain good tenant relationships. Most landlords don't lose money because they don't increase rent, they lose money because they increase rent without a clear strategy or understanding of the legal requirements and market dynamics. If you want to refine your rent review strategy and ensure your portfolio remains profitable, this is exactly the kind of practical, real-world scenario we analyse inside Property Legacy Education.
Steven's Take
With mortgage rates still elevated and the Bank of England base rate at 3.75%, covering your costs is non-negotiable. However, the game has changed with Section 21 gone. You can't just hike rent and expect tenants to leave quietly if they can't afford it. You need a solid, market-justified rationale for any increase and clear communication. Research local market rates thoroughly, and consider what a good, reliable tenant is worth to you. A small, justifiable increase is often better than an aggressive one that leads to a void period or a challenging tenant dispute. Focus on a sustainable approach that benefits both you and your tenants.
What You Can Do Next
Review your existing tenancy agreements to identify rent review clauses and renewal dates, specifically looking for fixed-term end dates or periodic tenancy status. This will dictate your legal ability to increase rent.
Research current local rental market rates for comparable properties using online portals like Rightmove and Zoopla, and by speaking to local letting agents. This provides evidence for a 'fair' increase.
Calculate your increased operating costs, including current mortgage payments (considering the 20% tax credit on finance costs) and insurance, to determine the financial necessity for a rent increase.
Draft a formal rent increase notice using a Section 13 notice (Form 4), ensuring it complies with the required notice periods (e.g., one month for monthly tenancies), available at gov.uk/rent-increase-landlord.
Communicate transparently with your tenants about the reasons for the increase and the new amount, ideally before serving formal notice. This helps manage expectations and maintain a good landlord-tenant relationship.
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