Landlord putting up rent by 25%

[Tenancystress]

I’m in a flat spin. We have rented a place for the standard rate for the area less than a year ago and the landlord has now said they want to make a 25% increase in rent due to rising costs. No date attached so I assume they mean that they will want me to start paying it by the end of this month. We’ll have to be paying it out of savings. I’m unable to work due to ill health.
I know that we will need to move out and find another cheaper place as the solution but it’s really not easy to do and we’ve only just moved. I don’t know how moving will affect school and the kids. We have been good tenants.
Is it really possible that anyone’s mortgage could have gone up by 25%? And is there any standard notice period for bringing in rent rises that I can ask for? Can I negotiate and offer to pay the exact difference of their mortgage rising? Citizens’ advice bureau? They’re not professional landlord just a single place they rent out so they may not know the rules. Please be gentle I am in a total panic.

The last time I rented, in my bit of the UK there's some organisation called rental ombudsman or similar. A big jump like that you could apply to them to have it assessed for being a fair rent. Fair is usually no more than 15% I think. So LL would need to prove rent had been below market rent for some time and market rent has now risen drastically, to justify the increase as fair rent. It's not as simple as their costs have gone up so they're passing the whole lot onto you.

You need to check your tenancy for whether the fixed term tenancy was 6 months or 1 year. The LL can't increase the rent during the fixed period usually.

If you're going to use not reporting the unprotected deposit as a negotiation tool, you want to include an agreement that you get the whole deposit back otherwise they'll just keep it against whatever cause they dream up and if it's not protected what can you do. Look into how much you can get for an unprotected deposit though, if you take them to court, it's quite a lot. 3x the rent or something I think.

The LL can't turf you out because they need to sell either, not during the fixed term tenancy period (unless there's a break clause). It doesn't matter if the LL is broke, you still have whatever rights you have to live there. They'll have to wait until the tenancy ends. 2 months notice usually applies to telling you 2 months before tenancy ends that they're not going to renew it.

As a landlord my mortgage went up from £466 to £1337 and for various reasons I wasn't eligible to re mortgage to a different mortgage company so couldn't bring the cost down. After 7 months I managed to remortgage and get the mortgage down to £725. So for 7 months the mortgage was over £400 more than the rent. I had to work overtime at work to pay for that so I was effectively paying my tenants to live in my house. Absolutely not their fault but as an aside they did trash the house and refuse to pay their last months rent for no reason so they weren't nice people.
When I do a yearly tax return the amount I pay on the mortgage isn't seen as an expense so I pay £150 tax a month for the "profit" I make on the house. (It's paid yearly but I make monthly payments). Gas safety certificate - £90 per year. Electricial safely certificate £90 although that is only every 5 years. Being a landlord now is a mugs game unless you are mortgage free.
That said, they would need to give you notice of the rent increase and it couldn't be done within your fixed term contract.

Also, because of the problems a lot of landlords are facing the rents where I live are increasing a lot so it is probably worth looking on rightmove what current rents are. They will be a lot higher than a year ago. If your deposit isn't protected they will find it very difficult to evict you as they should have protected it.

"I have no choice as they’ll possibly cap the rent and if I don’t do it now, I will be stuffed."

Your just reinforcing my point. You rolled the dice with your business model that the emergency interest rates implemented after the 2008 crisis would become the new normal - and to be fair they did for a long time. This allowed healthy profit from rentals and added bonuses of considerable capital appreciation. Now that the Global financial situation is returning to historical norms your immediately in trouble and needing to force increases on your Tennants. This is purely a result of your chosen business model - not the fault of the nasty government. (though it is fair to say they should have changed the tax implications of BTL much much sooner). Residential property being used as investment leverage for BTL is truly parasitic behavior imo. I do however tip my hat to you for keeping your rents below market rates if that is indeed what you have done up until now.

You've had good advice on this thread but in summary:
In the absence of a rent increase clause in the tenancy agreement or your consent, rent cannot be increased during the fixed term (before June)
Any rent increase thereafter has to comply with s13/14 of the Housing Act 1988 - in writing, at least 1 month and you could challenge the amount by a process which the notice should tell you about.

Whilst your agreement has a break clause, a landlord cannot serve a valid s21 notice unless he or she has complied with prescribed information requirements which includes giving you:
A valid epc
a valid gas certificate
How to rent checklist
Deposit protection information.

If your deposit was not protected it MUST be returned to you in full before a s21 notice is served.

So...your rent could go up but probably not until June and even then you could challenge it

Landlord cannot evict by s21 until he has complied with all the usual requirements although he might find another way to evict e.g. claiming he is going to move back in - which requires a different type if notice.

Tell your landlord he cannot increase rent during the fixed term. Then wait and see what happens. I'd keep all.the other failures to yourself as you could deploy these at a later date if he tries to evict.

Thank you again everyone your advice is so helpful. This is not a below market rate that we are paying. That doesn’t mean it’s really easy to just move out and find another place but I do appreciate it might come to that.

Boom I am worried that this could be a residential mortgage not a BTL mortgage that the landlord is talking about. So we could be in a sublet of what is normally their home. If the landlord is really desperate for money to pay their new mortgage, and we can’t pay it for them; if they need to move back in here, is that still the standard two months’ notice period? I can’t see anything to shorten that in the contract.

Even if the landlord tried to rely on ground 1 schedule 2 Housing act 1988 (property was only or principal home and moving back in) that notice cannot expire before end of the fixed term which is June. Possession proceedings would be mandatory but there would still have to be a court hearing unlike s21 proceedings where a court could order on the papers.
Hopefully you'll be OK until.June.

This predicament is a good reason why amateur BTL landlords need to be driven out of the market. They simply do not have the finances to be in business.
With any luck, Labour will introduce more measures to protect tenants from this kind of behavior.

Unlikely their mortgage has gone up by 25%, just landlords doing what they do. they should give you decent notice. Have you looked into whether you would qualify for any Universal credit to help with the rent?

Why is it unlikely? Our BTL interest only mortgage has tripled since we came out of our previous fix. BoE base rate has more than quadrupled since 2021…

Though of course they should have protected the deposit, drawn up a legal tenancy agreement etc etc. Do you have a Gas Safety certificate OP?

I agree, we are just coming to the end of our deal and the best we can get is about four times higher.

All businesses can offset borrowing apart from BTL. Housing companies, which own a portfolio of properties can do it.

All businesses, including btl, CAN offset borrowing costs. Its only those who are "investors" who now can't. If your btl is a genuine business, and not an investment, you are not treated any differently to other businesses as I understand it ?

@Mummyoflittledragon ”All businesses can offset borrowing apart from BTL. “

Only the amateur landlords running BTL as a ‘side hustle’ rather than a business are caught out by this.
Then again, the government announced S24 in 2015, so the BTL brigade had 9 long years to sell and realise the profits from the super low interest rates/tenant paying the mortgage plus profits/raising house prices, or incorporate.

They’ll be crying next if/when Labour increase the minimum EPC rating for rentals. It’s sure to come in the next parliament.

I have to agree with your last paragraph, a Labour government is pretty likley now - and they won't be pandering to the plight of amateur property investors. I think rent increase caps are almost certain.

Rent increase caps sound like exactly the sort of thing Labour would introduce and as a person with no skin in the game (neither a LL nor a tenant) I feel like this would be popular with the general public.

I'm a landlord in the USA and my city a few years ago introduced rent control. It hasn't been great for either landlords or tenants. We have always kept our rents on the low end of average, and rarely raised them for sitting tenants unless they were there for a really long time (our longest was 17 years), relying on being able to make a necessary increase when the tenancy ended. However, the limit on what we are now allowed to do, whether it's done every year or at the end of a tenancy, means we actually have to raise them a little every year, otherwise we can never catch up with constantly-rising costs.

One of the differences between UK and US tenancies is that on my side of the Atlantic the landlord pays the property taxes, and those and insurance costs go up steadily. We pay utilities for common areas in the three-unit building we own, and those have gone up too. We provide a washing machine and dryer in the basement, and pay the costs for those - currently crossing our fingers they don't need to be replaced. The cost of that to tenants has been $1.50 a go since we put it in fifteen years ago, but we don't know how to increase it despite the water bill and the electricity bill and the gas bill that run it all going up steadily.

Isn’t it better for the tenants though @Britinme that the rent gets raised a little each year rather than suddenly being handed a big rent increase after a few years? I feel like I would find that easier psychologically & financially.

@Twiglets1 - I think so. However, I can see the issue tenants were having here. There is a distinct difference between apartments owned by big corporations, who basically neither know nor care about their tenants, and those of us with a few units (I have four in total - three in one building and a separate small bungalow) who get to know them quite well and prefer to keep our tenants for a long time even if it means keeping the rents lower than they could be. And having said that, there are also shitty landlords who don't fix stuff and don't take care of things, and some of those are little guys with not much money.

There's a common misconception that rent money = landlord's income, which of course it isn't. Return on investment in our buildings varies between 4% and 10% of the money invested in them minus expenses, depending in any year on the work required to maintain and repair the buildings - there have been years in which we've made almost no money at all, and on one property this year I know I need to put in at least two new windows that are in poor condition, so I don't anticipate getting much return on that this year.

As it happens I don't have a mortgage on any of my properties so nobody is paying my mortgage, which is a common resentment among tenants, and over here because we have thirty year fixed-rate mortgages the rise in interest rates hasn't hit landlords so hard, but I know in the UK there are small landlords hit so hard by interest rate rises that they are basically paying to have people live in their house and they are likely to sell to the aforesaid big corporations.

In one discussion I was in, I was told that it was unreasonable of me to expect to make any profit at all on investment in property because price rises would hand me a profit eventually when I sell. Unfortunately I can't live on that, and I can't think of another investment where you wouldn't expect to see a return on it. But if your view is that nobody should own property somebody else lives in, then I guess that's reasonable from that angle.

I do my best to be a decent landlord, and I hang on to tenants for a long time so I can't be that evil.

Not a side hustle for me. We did this about 25 years ago when we moved abroad for a few years with dh’s work, firstly to keep our hand in the uk property market when we returned and secondly, to offset the cost of my not having a decent career.

Setting up a business wouldn’t have been practical and by the time the government changed policies for political reasons, we were committed - my circumstances changed and I am too ill to work so this is my pension.

As for rent caps, I don’t want to increase as rents are ridiculously high and caused primarily by governmental policies such as the change in mortgage interest rules in btl. But with my tenants currently at £250 below market rates I cannot afford not to with labour likely coming in and probably capping my rents at these low rates. I will keep them below market rate though. Long term tenants deserve the recognition.

We aren’t turning a profit right now as I’ve been revamping the properties, one a year to the tune of about 10-15k a time depending on what needs doing. Plus temporary housing for the tenants while the work is done if required. In my head I just would not be able justify rent increases if the houses aren’t in great shape so I’m glad I’ve done that before putting up the prices now.

As for minimum EPC, I have no concerns there.