Some advice please regarding rent increases

[Fibi36]

I am a landlord in Scotland with 6 one bedroom flats. All rented by the same tenants for over 10 years. Tenants are all great.
Their current rent is £390 per month. A combination the rent rise ban for 2 years because of Covid then another 2 years of being able to raise the rent by 3% (couldnt be bothered for £30!)
So now the rent is really low average rents for one bedroom flats in the area are £650 to £850 a month.
I have no mortage on these flats but just spent £70k on new windows, new roof and painting the outside and inside and new boilers. I needed a loan to do this.
For one year only in Scotland there are no rent controls so this is the only year that I will be able to substantially increase their rent.
Tenants all.working.
I would really like to increase the rents to £550 a month. An 41% increase is huge however I am finding it impossible to manage myself and exhausted my savings.
Their rents would still be way under the market average so even if the tenants went to a rent tribunal I.know they wouldnt win
The tribunal would actually increase their rents to the average amount.
Its a dilemma that is causing me to lose sleep! I am not a horrible.money grabbing landlord however I need to be able to pay my own bills
Am I being unreasonable putting up their rents by 41%?

Can you send out pre notification? Explaining that due to the recent accommodation upgrades, plus the previous pauses due to Covid restrictions you are now raising the rents to be more inline with what they need to be but will still be under the current market rates?

The ball is in their court if they then want to try look elsewhere?

I think a 41% rent increase is totally unreasonable whatever the starting rent is. You should have increased the rents by the 3% when it was allowed so there isn’t so much of a hike on subsequent rent increases. Tenants need to be able to budget and plan for rent increases so you are not doing them any favours by freezing rents year on year and then hitting them with a massive increase.

When was the rent last raised?

Its a lot in one go, but they've benefitted from below market rent.

I’m also a LL of 5 properties in NW England. This is why I always make a small increase at every opportunity, I think you need to do it OP, but I would expect blowback/challenges/tales of woe because people do tend to live to their means and it may be hard for them to find such a large increase all at once, despite what local rents have done. Better for them to be mildly grumpy than for you to sell up because you haven’t made a profit, or recovered your outgoing?

In Scotland landlords were unable to raise rents for 2 years then 2 years of a max of 3%.
I havent raised their rent for 5 years due to this.

I could have raised their rent by 3% last year but for £12 a month it didnt seem worth it.

I was thinking of giving 9.months notice. The tenants womt be able.to find somewhere else without doubling what they pay now even if there was anything available.

The.important thing to note is that this is the only year I will be able to catch up their rents as rent controls are coming back in next year

Yabu.

That’s too big of a rise at once, that’s why they allow small % increases normally

You don't actually have a choice. What's your alternative? Financially ruin yourself?

You have got to take emotion out of it and be pragmatic.
Do you think the banks worry when they increase mortgage rates? Mortgages go up hundreds.

It's just business.

Do it and that's that.

Agree with pp you're not running a charity here. I'd give 3mth notice. It gives the opportunity for people to review their budgets accordingly. I bet nobody insisted you didn't do the upgrades to them did they? So now you need to adjust accordingly. You'll have saved them individually on heating costs alone with the improvements, and summer will be on us by the time the rent increases kick in.

If they're all working then they can cut their cloth to absorb the £160pmth increase. It's not that extortionate and either a night or two less out/or an overtime shift or so would cover it.

Give 3 months notice and do it. Sent notice explaining why increase is so large. In future increase a modest amount every year even if by 1 percent. You do renters no favours by not increasing when you can then a huge hike. It makes it hard for tenants to manage budgets. I realise the Scottish government are partly responsible for this though.

Just do it. Give them plenty of notice so that if they're not willing to pay the increase, they can look elsewhere and you can find new tenants. They have benefitted massively from low rents for years and you can't continue to subsidise them indefinitely.

Something similar happened to me and the tenant kicked back. I told him that if he could show me any similar local property that was being advertised for a lower rent then I would reconsider. Of course he couldn't (I was still charging a below market rent but it was higher than what he had been paying).

I am a landlord in Scotland too, I hadn't learned about rent control starting again in a year. If I was you I would do the increase you suggested with 3 months notice. Surely they are expecting it. You aren't running a charity and if you are making home improvements for them that needs to be paid for. Sounds like they have had very cheap rent for a very long time.

That's a huge hike, but maybe explain why and give them an option to leave or negotiate. Sounds like they've benefited for a long time with below market rent. Even what you're proposing sounds like its still below market. The other thing would be how much having these good tenants are, so perhaps working out a regular increase over time to get back on track

If you need to do it, then do it. It’s a business, you’re not a charity.

Give them as much notice as possible and increase the rent by as much as possible. No rent increases for 5 years is nuts.

Many thanks for all of your replies. I appreciate them and its been really helpful.
Landlords get such a bad press these days and government interference has been far from helpful.
Its a 3 month notice period for tenants in scotland if you want to increase rent so I am going to double it to 6 months and go ahead with the 41% increase.
They wont like it but I have no choice its either that or sell up which wont help them at all.

Just do it OP. I also think 9 months notice is way too long. 3 months maximum, which will give them plenty of time to find another more expensive flat to move into. I’d be surprised if anyone moves out but, if they do, you can put their flat up to full market rate so it’s a win-win situation for you 🤷‍♀️

I’d go ahead with as much notice as possible. My mortgage increased by 40% overnight when the rate offer ran out that’s just life isn’t it. I think you’ve been very generous so far and they are still benefitting from a cheaper than market position. If they decide to move out you can rebalance to market rate.

Properties should be at market rate in comparison to other similar properties in the area, landlords are not a charity so rents need to reflect what is normal which is what you are planning on doing

If tenants are paying a lot less than market rent why would they be surprised when it is brought to the same level?