In this "Renters' Rights Bill (RRB) Bitesize" we look at the changes we can expect for rent increases in 2025 and going forward once the RRB becomes law.
The current position
Currently, landlords can increase an assured tenant's rent in one of two ways: by reference to a clause in the tenancy agreement (a "contractual rent increase") or, where there is no such clause, by serving notice pursuant to section 13 of the Housing Act 1988 (the HA 1988), (known as a "statutory rent increase").
Contractual rent increases are the norm in the private rented sector (PRS). These are often index linked or set at fixed percentages/amounts, set out in the tenancy agreement, so both landlords and tenants know what is being agreed from the outset.
Registered Providers of Social Housing (RPs) tend to have a mix of contractual and statutory increases, commonly a contractual increase in year one and statutory thereafter. This allows a common annual increase date across a landlord's stock.
Where statutory rent increases apply, a tenant can refer the proposed new rent to the Tribunal for determination. The Tribunal's jurisdiction is to determine the open market rent, which will then apply. Currently, a tenant effectively takes a gamble by making an application for determination, because there is a risk that their rent may be increased beyond the sum specified in the section 13 notice.
What's changing?
The proposed RRB amendments to section 13 will have very considerable impact for landlords in both sectors as outlined below.
For PRS tenancies, contractual rent increases will no longer be permitted. Any rent increase clause in the tenancy agreement will be void, so index linked annual increases can no longer be included as a tenancy term.
Instead, those PRS landlords will have to serve a section 13 notice, giving at least two months' notice of the proposed increase to take effect at the beginning of a new period of the tenancy. There can be no increase within the first 52 weeks of the tenancy, or the last increase.
In contrast, contractual increases will still be permitted for "Relevant Low-Cost Tenancies", that is an assured tenancy of social housing, granted by an RP landlord. This means that contractual increases can continue to be used within the first 12 months of a tenancy in line with the current practice of many RPs, facilitating April increases across a landlord's stock. Where section 13 is used, one month's notice will be required (as now).
Another big change is to the Tribunal's jurisdiction. Although this will still be to determine the open market rent, under the RRB the new rent will be the lower of the proposed rent and the open market rent. There will now be "nothing to lose" for a tenant in making an application, as the rent cannot be increased beyond the amount proposed in the section 13 notice.
For challenges to a rent increase proposed in section 13 notices the new rent will be payable from either:
- The date specified in the section 13 notice, but only if that date is on or after the determination date;
- The next rent date after determination; or
- If the Tribunal finds that either of the above would cause "undue hardship" to the tenant, the date that the Tribunal directs (up to 2 months after determination).
Implications
The Tribunal is widely expected to become a lot busier than at present. Due to the "nothing to lose" element of these reforms, there are likely to be far more applications for determination of rent. These cases could take months to conclude.
The consequence of this will be that rent increases are delayed in taking effect because it will no longer be possible to back-date them to a date that is prior to the date of determination by the Tribunal.
As there can be no statutory increase within 52 weeks (i.e., a year) of a previous increase, this will have a knock-on effect on the following year's review date. Review dates could end up differing across a landlord's stock, creating a far greater administrative burden.
What should landlords be doing now?
For RPs, if granting new tenancies of social housing, it would be sensible to include ongoing yearly contractual rent increase clauses (instead of the common practice of a contractual increase in the first year followed by statutory increases thereafter). That will keep these cases out of the Tribunal and avoid disrupted rent increase cycles.
In the PRS, landlords have no choice. Any contractual rent increase provisions included in the tenancy will be void. You may wish to familiarise yourself with the section 13 process and consider who will be responsible for serving your rent increase notices. When the changes take effect, give tenants plenty of notice of rent increases and try to agree these to avoid challenges.
Remember, the Tribunal's role is to determine the open market rate. Minimise challenges by setting rents in line with the market and be transparent with tenants about how proposed rent increases have been calculated. Providers of Retirement or Build to Rent housing will need to think about relevant comparators.
