RENT INCREASES & RENEWING A TENANCY
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Renewing a Tenancy : Shorthold Tenancy - End of a Fixed Term
Renewing a Tenancy : Assured Tenancy - End of a Fixed Term
Rent Increases
Rent Assessment Committee
The Fair Rent System
Renewing a Tenancy : Shorthold Tenancy - End of a Fixed Term
1) The landlord agrees a replacement tenancy:
This will automatically be on shorthold terms unless he agrees to set up a replacement tenancy on an assured basis.
If it is granted on a fixed term basis then the landlord will only be able to gain possession during the fixed term on one of the following grounds:
2,8,10 to 15, 17.
Advantages of a fixed term renewal are:
- New terms including provision for a rent increase can be negotiated and included in the agreement
- Both parties are certain that the tenancy will continue for the specified period
However, the landlord will not be able to gain possession of the property for at least six months after the start of the new agreement.
If both the landlord and the tenant agree just to carry on the tenancy from one rent period to the next then a contractual periodic tenancy is created. The landlord will be able to gain possession at any time provided that he has given the tenant two months notice (under section 21 of the Housing Act 1988) that he requires possession. Periodic tenancies are also useful where a tenant has asked to stay on for a short but undefined period.
2) The landlord does nothing
The tenancy will automatically run on from one rent period to the next on the same terms as the preceding fixed term shorthold tenancy creating a statutory periodic tenancy. The tenancy will continue on this basis until the tenant leaves, the landlord replaces the tenancy or requires possession of the property.
Renewing a Tenancy : Assured Tenancy - End of a Fixed Term
1) The landlord agrees a replacement tenancy
Any replacement tenancy agreed between the landlord and tenant can only be on assured terms unless the tenant agrees that the landlord can replace it with a shorthold tenancy. Under the Housing Act 1996, any assured tenancy started on or after 28 February 1997 will automatically be replaced on an assured basis whatever the tenancy agreement says, unless the tenant gives the landlord notice that he wants a replacement tenancy on shorthold terms.
The replacement tenancy can either be for a fixed term or it can be agreed that the tenancy continues from one rent period to the next, called a contractual periodic tenancy.
If a new fixed term tenancy is agreed, the landlord will only be able to gain possession of the property during the fixed term on one of the following grounds: 2.8.10 to 15, 17
Possession can be applied for under any of the grounds at the end of the fixed term but a landlord does not have an automatic right to regain possession of an assured tenancy at the end of a fixed term.
If the replacement tenancy is agreed by both landlord and tenant to run on a periodic basis (i.e. from one rent period to the next) it is called a contractual periodic tenancy. Unless agreed otherwise the tenancy will continue on exactly the same basis as before. It is good practice for the landlord to write to the tenant to confirm what has been agreed.
2) The landlord does nothing
The tenancy will automatically run on from one rent period to the next under the same terms. This is called a statutory periodic tenancy. It will continue to run on this basis until the tenant leaves the property.
Rent Increases
Should these be established in the Tenancy Agreement?
A tenancy agreement should detail the rent to be charged and the arrangements for paying it.
If the tenancy is for a fixed term, the agreement should state whether the rent will be fixed for the length of that term, or whether it will be reviewed at regular intervals, and how this will be done.
For a contractual periodic tenancy, again the tenancy agreement should detail how often the rent will be reviewed and the procedure for doing so.
Rent increases are not dealt with in the tenancy agreement
For fixed term tenancies, rent can only be increased by a landlord with the consent of the tenant.
When the fixed term ends and the tenancy lapses into a statutory periodic tenancy, the landlord can increase the rent with the agreement of the tenant. Alternatively, under the Housing Act (1988), he can propose a rent increase to be payable as soon as the statutory tenancy begins. A landlord can then propose further increases at yearly intervals after the first increase.
For a contractual periodic tenancy under the Housing Act (1988) a landlord can propose a rent increase on a special form titled Landlord's notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy which will take effect one year after the tenancy began.
A landlord must give at least a month's notice of the increase if the rent is paid on a monthly basis or a week's notice if the rent is paid weekly.
A landlord can then propose further increases at yearly intervals after the first increase.
What if a tenant does not agree to a rent increase?
The tenant can apply to a rent assessment committee to decide what the rent should be using a form titled Application referring a notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy to a Rent Assessment Committee. The committee must receive the application before the date on which the new rent is due.
Rent Assessment Committee
They are usually made up of 2 or 3 people, usually a lawyer, property valuer and a lay person. They are drawn from rent assessment panels and there is no appeal against a committee's decision except on a point of law.
They may make a decision by looking at the relevant papers but either the landlord or tenant can ask for an informal hearing which they may both may attend.
Can a shorthold tenant apply to a Rent Assessment Committee?
A shorthold tenant can ask a committee to set a rent at the beginning of the tenancy if they consider that the rent being charged is significantly higher then comparable rents in the locality.
However under the Housing Act (1996) for tenancies commencing after 28 February 1997, a tenant can only apply to the committee once within 6 months of the commencement of an original tenancy. An application cannot be made if the original tenancy has ended and been replaced or more than 6 months have elapsed since the original tenancy began.
The form a tenant must apply on is titled Application to a Rent Assessment Committee for a determination of rent under an Assured Shorthold Tenancy.
The committee will only fix a rent if it considers the rent to be significantly high compared with rents for similar properties in the local area. It will then decide the rent a landlord could reasonably expect to get for the shorthold tenancy taking this information into account (if there are sufficient properties available to rent for a direct comparison to be made).
The amount of rent fixed by the committee is then the legal maximum that the landlord can charge.
Note that if the property is let on an Assured Tenancy, the Landlord cannot be challenged on the rental amount in this way. However he may face different problems in regaining possession (see section 6)
The Fair Rent System
The Rent Act 1977 set up a register of 'fair rents' for dwelling houses. Once a rent had been registered for a property, that figure became the maximum amount chargeable under any current or future protected or statutory tenancy on a property.
Fair rents apply to tenancies commencing before 15 January 1989. Under the scheme a landlord or a tenant can apply either separately or jointly to the rent officer to register a rent every 2 years. The rent officer decided the fair rent according to the rules in the Rent Act (1977).
However the law subsequently changed and from 1 February 1999, fair rent increases were limited by linking them to changes in the Retail Prices Index. The rent officer still determined a fair rent, but additionally calculated the maximum fair rent according to the rules in the Rent Acts (Maximum Fair Rent) Order 1999.
This means that if the fair rent determined by the rent officer was higher than the maximum fair rent calculated, the maximum fair rent was registered as the rent payable for the property. The rent officer could also register a variable amount payable as service charges.
However a judicial review in a case brought by a private landlord in January 2000 has now ruled that introducing this form of rent capping was outside the authority of the Secretary of State for the Environment. The Maximum Fair Rent Order 1999 has now been quashed from its inception. The consequence is that rents registered under these provisions are now incorrect, and landlords should expect the Rent Service to contact them about any correction to be made to the registered rent.
A Government appeal or an attempt to introduce legislation to cap rents may further affect this situation.
