Buy-to-let landlords are being told to be cautious in raising rents for tenants under current market conditions.
Research from mortgage lender Kent Reliance discovered that nearly one-third of buy-to-let landlords are planning on increasing rents following recent tax increases.
Both the 3% additional Stamp Duty surcharge and reductions in tax relief for buy-to-let investors have lead many to pass on these increased costs to their tenants.
However, Jane Morris is worried that further increases in rental prices could well lead to further renter evictions from the sector.
New figures from the Ministry of Justice reveal that there were 10,732 repossessions of rented homes by court bailiffs in the first three months of 2016. This was a rise from the 10,253 recorded in the final quarter of last year.
Morris noted, ‘landlords are increasingly facing rent arrears, as rent escalation continues to outstrip gross income. They are also facing a financial squeeze due to restrictions on their tax breaks and some may be raising rents to supplement their income. Pushing up rent rises further will put huge pressure on those tenants who are already struggling to pay their rent. We may will see evictions continuing to rise over the next few months.’
‘Times are very tough for many tenants and demand for rental accommodation is soaring in many parts of the UK. Landlords need to extra vigilant when they take on a new tenant. But a few simple checks will help identify if a tenant is in a good financial position or not,’ she added.
If you are a buy-to-let landlord, you should think carefully on the possible financial ramifications of raising rents for your tenants. Should you eventually decide to press ahead with rent increases, make sure you follow the correct processes:
Get an agreement-For all fixed-term tenancies, you can only increase rental fees if your tenants are in agreement. Should they disagree, you can only raise rents at the conclusion of this term. Outline why you have come to this decision and make sure your proposed increases are in line with other local fees.
Adhere to the terms-If your existing tenancy agreement gives a procedure for upping rents, make sure you stick to these terms. Your landlord insurance will not cover you for tenants defaulting on rent due to you breaking conditions!
Follow the write process-Should there be no outlined plans for rent increases, you can renew your conditions at the conclusion of the fixed-term. This must be done in writing and copies must be kept by both parties-and you must both agree!
Show your true form- When raising rents at the end of a fixed tenancy period, you should utilise a ‘Landlord’s notice proposing a new rent,’ form. If your tenant has a weekly or monthly agreement, you must serve them at least one month’s notice of rent rises. Should they have an annual agreement, then six months notice must be served.