Rent increases under the Renters (Reform) Bill
In the Government’s response to the Levelling Up, Housing and Communities Select Committee report on the published Renters (Reform) Bill, it confirmed that it does not support the introduction of rent controls.
The response states:
“The government is clear that rent should be agreed between the landlord and tenant, and nothing in our proposals prevents parties negotiating as they do now. It is not for government to set or steer rent increases and we do not support the introduction of rent controls. Evidence suggests that these would discourage investment in the sector and would lead to declining property standards as a result, which would not help landlords or tenants.”
In the second reading of the Renters (Reform) Bill on Monday 23rd October, the Secretary of State for Levelling Up, Communities and Housing, Michael Gove stated:
“However, one of the challenges of rent controls of the kind that I believe he is advocating, and that have been advocated by others on the Labour Front Bench, is that they are proven to reduce supply overall, and a reduction of supply on the scale that an intervention of the kind that he puts forward would only increase rents and reduce the capacity of people to be able to live in the private rented sector.”
How do landlords increase the rent?
Currently landlords can increase the rent by giving a section 13 Notice rent increase notice or utilising the rent increase clause in the tenancy agreement.
What changes does the proposed Bill make to the process?
In the Bill landlords would be able to increase the rent once a year in line with market rate by giving two months’ notice of the increase. Landlords will no longer be able to use rent increase clauses.
If tenants do not agree with the rent increase, they can challenge it through the First-Tier Tribunal. The Tribunal consists of an independent panel who will decide what the rent should be set at. The Tribunal will look at the market rate and could end up setting the rent higher than what the landlord is asking for.
The new rent will then usually apply from the date in the section 13 Notice; however, it can be delayed to the date of the hearing if the tenant will suffer exceptional hardship to backdate the increase of the rent.
Impact on the Tribunal
It is very likely there will be an increase in tenants challenging the rent increase through the Tribunal.
The current delays are four-six months to deal with rent increase disputes. If the Tribunal does not backdate the rent increase from the date of the rent increase Notice, landlords could be out of pocket of the additional amount of rent while they wait in the queue.
The government does also need to ensure that that the Tribunal has sufficient capacity and resources to deal with these extra cases to prevent the delays from getting any worse.
