I hope this email finds you well. I’m writing to seek your advice on the current rental market in England.
– Rolling Contracts
I am a new landlord and own a property in southern England currently leased to a family of four (two adults and two children from overseas). The lease is about to expire in about a month. The family has been great tenants over the past year. When I first leased the property (semi-furnished) to them, they didn’t have income, and the funds were mainly from their family savings or gifts I think. To ensure timely rent payments, we agreed in the contract that they would pay three months’ rent in advance each time. And they have always adhered to this arrangement. Now, I think one of the parents got a job in another city with an income. But they are requesting to switch to a rolling contract and pay rent monthly instead of quarterly. While I appreciate their good behaviour as tenants, I’m not too sure about the potential risks.
– Rent adjustment
Another thing I need to consider is rent adjustment. When I leased the property to them last year, I offered a slightly lower rent than the market rate, which was around £1500 - £1600 per month. I charged them £1450 per month. Considering the inflation rate, I’m not sure how much I should adjust? Should I increase it by 3%, 4%, or even more? Or, given they want to switch to rolling contract, should I at least put it back to £1500, to mitigate the risk of having voids? Should I also then increase it further, given inflation?
I would be extremely grateful if you could share your thoughts. Thank you so much in advance.
It is generally in a landlords interest to have a short fixed term and allow the tenancy to become periodic at the earliest opportunity, (usually 6 months).
It seems perfectly reasonable for them to wish to move to a monthly payment schedule and having taken a risk on housing them in the first place; a risk that seems to have paid off, I think you might as well agree to this. In any event, you will have no choice but to move to monthly rolling tenancies and no more than 1 months rent in advance once the Renters Rights Bill becomes law, (probably this Summer).
A rent increase in line with inflation is usually advisable as this is then affordable for the tenant.
I thought it’s in a landlord’s interest to have a relatively long fixed term though (therefore secure in terms of rent income)? My understanding has been that 12-month fixed term is an industry standard (that’s what I was used to 10 years ago as a student).
In terms of rent increase, what level should I increase it to?
I used Bank of England’s Inflation Calculator (link) to come up with a price, i.e. type in £1450, select “in 2024” and “cost in Mar 2025”, it returns £1474. My guess is, that’s the baseline considering inflation. Then, as my tenants do not have a guarantor, and also I would like to sort of reset the price to the current market rate, which is roughly £1500, do you feel it makes sense to round it up from £1474 to £1500?
Its in an agents interest to keep renewing fixed terms as they charge on each occasion. A landlord cannot serve either a s21 or some s8 notice grounds during the fixed term, so if the tenancy goes bad, youre stuck with them. On the other hand, if the tenant wants or needs to leave early, only a foolish landlord would try to make them stay for the duration. So in practice its only the landlord thats bound by fixed terms. Theyre useful in student tenancies, but thats about it.
It feels like your default fixed term for non-student tenancies is 6 months? In that case, I guess you would need to renew the tenancy every 6 months? And I guess you would roll it into monthly tenancy until the tenants leave?
I read a bit about Renters Rights Bill and it seems there will be no fixed term with tenants only need to give 2 months notice. That’s quite unfair for landlords…
I agree this is unfair in the initial 6/12 months, but after that, the alternative fixed term renewal system is very unfair to tenants. For example, if, for example, their fixed term ran out today 24th April, offering only a 12m renewal for another 12 months, basically gives them the option to move house on 24th April, or wait another year, and then have the option to move out again on 24th April next year. This is overly restrictive, and not a practice I would want to employ as a Landlord.
And 1 months notice, in my opinion is more than enough for a Landlord to prepare for life after that tenant, so personally, I cant see me insisting on 2m notice under the new RRB system.