I am about to sign a 12 month lease, and this is what is says on the contract under “Rent Increase”:
6 RENT INCREASE
6.1 The Landlord is entitled to increase the Rent payable under this tenancy, either during the Tenancy Term or any subsequent renewal or periodic term, on each anniversary of the start date of this tenancy (“The Rent Increase Date”). The increase will be a minimum 5% in addition to the current Rent payable.
What I want to know is if the landlord / agency can add a minimum rent increase, such as the 5% in this case.
That is already illegal. The LL can’t increase the rent during a fixed term unless you agree to it.
Currently, the LL can only increase the rent unilaterally once a year outside a fixed term and if they increase it above market value, you can take them to a rent tribunal and refuse to pay the extra until the tribunal rules on the increase. There’s no way therefore that a contract can stipulate an increase amount in advance because there’s no way to know what the market can sustain in advance.
If this is an agency, it’s incompetent and the LL may well not be aware of this. I would talk to the LL directly if you can and ask for that clause to be removed. I would strongly advise you not to sign this contract and to reconsider whether you really want to be working with an agency (or LL?) that doesn’t know what they are doing.
I think that the rent increase term may be enforceable for increases of 5%, but you could check this with Shelter legal to see whether they think its potentially an unfair contract term.
Rent increases above 5% may be more readily challenged as the term doesnt set a maximum. I could see a judge striking out the whole clause if the landlord tried to enforce that, but Im no expert in court procedures.
I guess that if the increases start to take the rent above market rent for the property you would find somewhere else and give notice. I’d be more concerned about the first part of the clause allowing increases during the fixed term. I would ask for that to be removed from the contract.
As has been said, the law would change before the fixed term is up and the landlord will have to give you a new contract with none of this nonsense in it.
It is illegal to unilaterally issue a rent increase in a fixed term. It’s therefore illegal to provide no option but to sign a contract with such a clause already in it if, as is the case here, the applicant is clearly not agreeing to it.
As others have said the courts will usually uphold a contract term to increase the rent during the fixed term on the basis that both are entitled to make arrangements to suit themselves provided the terms are clear.