dear moral money,
I have been renting out a four bedroom house in London to students and graduates for the past 20 years. The same group of tenants have lived there for the past two years, paying around £2,300 a month in rent.
They are pleasant to deal with and take care of the house, they pose problems as soon as you spot them, and so on. For this reason I did not increase the rent while the group lived there, it is difficult to find good tenants.
The property is valued at almost £1million and is mortgage free but like everything else my other expenses are increasing too. My agent tells me it’s about time the rent caught up with the property’s value — and that I should increase the rent by 10 percent to keep up with the cost of living.
I suspect that my tenants, who are not making good money, cannot afford such an increase and will probably move out. But with inflation skyrocketing, it seems a no-brainer. However, I do not have to bear any higher mortgage costs and the tenants pay the additional costs themselves.
Personally, I’m financially stable, but life is getting more and more expensive for everyone. Should I raise the rent or freeze it again to help them?
JM, via email
Being a landlord isn’t as easy as it’s often made out to be – and sometimes a simple financial decision can be a difficult moral one.
Demand for rental properties in London has skyrocketed this year as rural renters return to the capital after lockdown. And inflation is now at a 40-year high of 9 percent. Some readers will agree that there is no moral reason not to raise the rent.
If you’d rather keep your current tenants, remember that any rent increases must be “fair and reasonable,” meaning they must match open market rents in your area. Your agent is right: judging by your description and with rents on the rise across London there is no reason why you shouldn’t adjust your rent accordingly.
Ideally, you’d get your tenants to sign a written agreement about a rent increase, but as you point out, if they can’t afford it, that’s unlikely. In this case, you would need to provide your tenants with a “Notice from landlord proposing a new lease” form, which you must do at least a month in advance to give them a chance to look elsewhere.
Remember why you bought the property in the first place. It is an investment to generate a steady stream of income and you have every right to get the maximum benefit from it.
However, good tenants are difficult to find and there is no guarantee that a higher earning group will treat your property with the same respect as the people currently living there.
If their loyalty is something you value, it might be worth increasing the rent, but by a more modest amount that they can afford. After all, downtime costs you a lot more.
https://www.telegraph.co.uk/money/consumer-affairs/wrong-increase-tenants-rent-9pc-line-inflation/ ‘Am I wrong to increase my tenants’ rent by 9pc in line with inflation?’