Rent increase and contract extention


my current tenants are asking me to extend their contract for 2 years. they are paying 1300 for a 1bedroom flat in sinclair gardens. i am aware the rent prices have increased considerably since they rented. so i have two questions:

  1. what is the fair amount of rental increase to good tenants of a 1 bed flat in shepherds bush?
  2. is it wise to sign a 2 year contract given the current circumstances?

Personally I would extend to current market value or close to it. I would weigh up how fast the property would let.
Signing up for 2 years puts you at unnecessary risk.

thanks for the reply Mark. unnecessary risk due to inflation and rising prices? they are just such great tenants! i forgot to mention that :slight_smile: what if i include a break clause with rental review after a year?

Risk as in should you need to evict they have right of tenure until end of tenancy.

A break clause would certainly help as long as it’s equal iE either party can action it.

To answer your questions:

  1. Every landlord will have a different opinion on what is a “fair amount of rental increase”. If I like my tenants, I tend NOT to increase during their tenancy. If I increase by a percentage and prompt the tenants to move, I risk a void period which would easily cost me more, plus the administrative efforts of re-marketing the flat and looking for new tenants. I would look online at rents for similar flats and speak to local estate agents to understand the current rent for your flat. How much are you getting vs the current market? Is it worth the risk of losing good tenants? Once the current tenants leave, you can always adjust the rent to reflect the current rate, this is what I do.

  2. Ask them why they want a 2 year contract? The AST would automatically be a rolling periodic contract after the 12 month fixed term and this would be beneficial to both parties in terms of flexibility. As @Mark10 mentions, it does make it more difficult to evict during the fixed term. Mutual break clause does help.

You could include a clause that says the landlord can review the rent after a year in line with inflation (or something along those lines) although this clause isn’t strictly necessary to increase the rent.

I would tell the tenants that as long as both sides are happy they can stay as long as they like, but it will be on a periodic tenancy.

Dear Mita,

thank you so much for such a comprehensive explanation! very kind of you

i had no idea it was possible to increase during their tenancy? I guess only if there is a special clause in the contract? we signed a fixed contract in august last year and they want to resign a new contract which frankly I prefer as well as I live abroad and I like to have reliable, good tenants long-term. Their contract is 1300 rent however from september last year prices starting shooting up and now flats are min 10-20% higher in my area (including inflation) so it would be fair if i increase min 8-10% in my view.

Rolling contract is not what I would like either to be honest. I find it very unlikely that i would have to evict them…but a break clause sounds reasonable. I like the clause about possible rent increase due to inflation, i cannot believe my current contract didn’t include that. do you make your own contract or use openrent contracts? they dont seem to have these clause options.

Thank you ever so much for your help! really appreciate it.

The tenant can refuse a rent increase during the fixed term.

A rent review clause will limit your options in a rising market.

A 12 month tenancy with a 6 month break clause is effectively the same as a 6 month fixed then periodic. Many landlords said the same as you in 2019 about not needing to evict, then Covid happened.

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