With tenants now renting for longer and the Private Rented Sector (PRS) consistently growing, the rules surrounding rent increases on rolling tenancies have become a much bigger consideration for all parties.
But what rights do landlords and tenants have?
According to the English Housing Survey, 4.4 million households lived in rented accommodation in 2020, compared with 3.4 million a decade earlier.
The Department for Work and Pensions released findings from its Family Resources Survey, with data revealing that 18% of households are privately rented.
The number of people staying put for longer is also on the rise, which means renters rolling over their tenancies is now a far more common occurrence.
The PRS - A growing sector
In the case of a periodic tenancy (one which rolls on a week-by-week or month-by-month basis), a landlord typically cannot increase the rent more than once annually without a tenant's agreement.
The tenancy agreement signed by both parties at the start of a tenancy should set out how and when the rent will be reviewed to ensure the chances of disputes are limited.
There are general rules regarding rent increases, which state that a landlord must get permission to increase the rent by more than previously agreed during the fixed term of a tenancy. The rent increase must also be deemed fair and realistic. This usually means in line with average local rents.
When can a landlord increase rent?
If a tenancy agreement specifically states how rents should be increased, a landlord must abide by this. In general terms, if a landlord wants to increase rents on a rolling tenancy, they must:
- Give a minimum of one month’s notice to their tenants unless they pay rent annually, and then they must give a minimum of six months’ notice.
- Agree a rent increase with their tenant in advance, producing a written document of the agreement that has been signed.
- Provide their tenant with a 'Landlord's notice proposing a new rent' form.
Increasing rents – what are the rules?
When letting a home, there are commonly two types of tenancy on offer – fixed-term or periodic. Fixed-term tenancies are typically for six or 12 months and give both landlords and tenants peace of mind as the rent will remain fixed for this period (unless a clause has been included in the tenancy agreement to allow rent increases). With a fixed-term tenancy, rent can only be renewed at the end of the contract.
By contrast, a periodic – or rolling – tenancy offers both landlords and tenants more flexibility (usually only one month's notice needed from both sides to break a tenancy) but less security.
If a tenancy isn't renewed at the end of its fixed term, it immediately becomes a rolling one. This is usually for one month but will typically match the frequency of rental payments (so, if a tenant pays weekly, the rolling contract would be on a week-by-week basis).
What is a rolling tenancy?
While a fixed-term tenancy agreement provides greater long-term security and the reassurance of regular rental income, a rolling tenancy – where a tenant stays on after their fixed term has ended – can have advantages, too.
It saves landlords the time, cost and hassle of having to re-let the property to other tenants while also allowing them to keep hold of good tenants in the short term (even if their long-term plans are elsewhere).
Equally, a landlord can choose to increase rents at market value at any time on a periodic tenancy as long as they give one month's notice, or in cases where you pay rent yearly – six months' notice. It must also be restricted to only once a year without the tenant's agreement.
In the case of rogue tenants or a sudden need to retake possession of a property, rolling tenancies make it easier to evict or regain possession as landlords don't need to wait until the end of a fixed term to serve notice. However, they cannot serve a notice seeking possession under S21 Housing Act 1988 as amended in the first four months of your tenancy.
On the downside, landlords could quickly lose good tenants on a rolling contract as the notice required is much shorter.
Usually, the decision on whether to operate a rolling tenancy will depend on the landlord and tenant's circumstances, and how much flexibility they want. In some cases, rolling tenancies can continue for years with both parties satisfied with this arrangement.
Why a periodic tenancy can be good for landlords
- When a fixed-term tenancy ends, it automatically becomes a rolling tenancy if the tenant remains in occupation and doesn't move out.
- Once it becomes a periodic tenancy, a landlord isn't usually able to increase the rent more than once a year without the tenant's consent.
- Landlords must give tenants a minimum of one month's notice if they intend to increase rents.
- Rolling tenancies can work well for landlords and tenants but don't necessarily offer the same long-term security as a fixed-term arrangement.
With the increasing number of renters in the PRS – some of whom may merely be doing it temporarily or as a stopgap – the use of a rolling agreement may become more common in the future as landlords and tenants prioritise flexibility.
As such, landlords and tenants should both be aware of their rights and obligations regarding periodic tenancies.