The Intermediary – April 2025 - Flipbook - Page 25
BUY-TO-LET
Opinion
Clarity needed on
landlords’ right to
raise rents
M
ore than three
years aer the
Conservative
Government
published its first
whitepaper on
Rental Reform, the Renters’ Rights Bill
looks set to take effect by the Autumn.
The lion’s share of the Bill is now
set in stone, including the removal
of Section 21 ‘no fault’ evictions and
the abolition of Assured Shorthold
Tenancies (ASTs).
However, there are a few important
areas where the particulars are yet to
be worked out, including the details
around rent increases.
Rent rises
Under the new rules, landlords will be
permied to propose a rent increase
once a year. They must do this by
serving the tenant a Section 13 notice,
two months before they intend to put
up the rent. In its present form, the
Bill states that any proposed increase
must be in line with local market rents
and evidence provided if required.
If a tenant believes that the proposed
increase is unfair or excessive, they
can appeal to a First Tier Tribunal,
and no increase can be implemented
until the tribunal has made its ruling,
which could take months.
If the tribunal rules in favour of
the landlord, the tenant only needs to
pay the increased rent from the next
month onward, rather than making
up the shortfall that may have built
up over some time since the proposed
rent rise. That, in itself, seems rather
unfair to the landlord. Of more
concern, however, is the definition of
‘local market rents’, which will vary
enormously depending on not just
supply and demand in a local area, but
the type and quality of properties and
the definition of a ‘local market’.
There is also the issue of
undercharging. Research carried
out by Pegasus Insight in the first
quarter of the year revealed that 80%
of landlords were charging less than
the going rate for at least one of their
rental properties. This tends to happen
when a landlord likes a tenant and
wants to keep them in situ.
Both the logic and the sentiment of
this approach are understandable, but
the net result is to artificially subdue
‘local market rents’. So, under the
new system, landlords could be forced
to charge lower rents to all tenants,
rather than those with a proven
track record.
Given the time it takes for
Government and councils to gather
and publish data, there is also a risk
that any ‘local market rent’ figures
will be out of date by the time they
are applied to appealed cases, and
rulings could be unfairly based on
historic rents.
If the seing of rents in the private
sector is no longer to be permied
based on the free market principles
of supply and demand, surely it
would make more sense to link the
maximum permissible increase in
annual rents to a less arbitrary figure
than ‘local market rent’, such as a set
percentage above the rate of inflation?
This would at least bring clarity to
the process and minimise the need for
costly and time-consuming tribunals.
KATE DAVIES
is executive director at IMLA
on possibly outdated and inaccurate
‘local market rents’ risks placing
landlords in this invidious position.
Beleaguered landlords already feel
the Government and the regulator are
intent on stacking the odds against
them running their businesses
successfully, and the Renters’ Rights
Bill may be the last straw for many
weighing up the pros and cons of
remaining in the market.
Linking permissible rent rises to
inflation is no panacea, but such a
measure might go some small way to
reassuring nervous landlords that they
will not be flying completely blind
in future when it comes to balancing
the books. ●
Stacking the odds
More than half of the UK’s landlords
are small business owners, and they
are subject to the same cost-of-living
pressures and inflationary strains as
everyone else.
No other small business in the
country is legally restricted from
passing on their cost rises in the form
of higher prices to consumers. Relying
Landlords could be flying blind in future
April 2025 | The Intermediary
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