Eleanor Taylor, a Legal Practice Course Student at BPP University, considers the increasing use of Section 13 notices to obtain rent increase in the private rented sector.
Introduction
A landlord can increase the rent on a periodic assured or assured shorthold tenancy in two ways: by agreement between the tenants and the landlord, or by serving the tenants with a Section 13 notice (s.13 Housing Act 1988; Form No.4, Assured Tenancies and Agricultural Occupancies (Forms) (England) Regulations 2015 SI 2015/620, as amended by Assured Tenancies and Agricultural Occupancies (Forms) (England) (Amendment) Regulations 2016 SI 2016/443).
Over the past 6 months, the BPP Legal Advice Clinic Housing Clinic has experienced an increase in the number of clients who are tenants facing Section 13 notices from their landlords to increase their rent. We have conducted a study of the clients we have advised and drawn some data from their cases. 10 cases were utilised in the research and the findings are reported below.
Methodology
10 cases from the past 6 months were analysed, taking both the quantitative rent data and the qualitative data in the form of the advice the Clinic gave them, the outcomes of any Tribunals and any other problems the clients were facing. This has been synthesised, and a number of common themes have been identified across the cases.
High Increases in Rent
Firstly, the increases in rent demanded by landlords range from an increase of 7% to an increase of 66.7%, averaging at an increase of 25%. Whilst there is no general limit on the amount that rent can be increased by per year in a private tenancy, this figure is well above the average increase in rent seen across the UK in the past year. According to the HomeLet Rental Index (https://homelet.co.uk/homelet-rental-index), as of June 2023, the average rental price for a new tenancy in the UK increased by 10.4% compared to last year. The majority of our cases seem to be in London or the surrounding areas, where the average increase in rent for new tenancies compared to last year was 11.3% (https://homelet.co.uk/homelet-rental-index/london). Of the 10 cases examined, 8 of the proposed increases in rent by the landlord were above the average increases both in London and the UK.
In one case, the landlord themselves had contractually limited the rent increase to the maximum permitted by the statutory regulator for Social Housing. This states that “registered providers may not increase the rent of a tenant with fair rent protection by more than CPI + 1% in any year, subject to weekly rents not increasing by more than 7% in any year for a rent period that begins in the 12 months from 1 April 2023 to 31 March 2024 (even if the tenant’s rent is below the formula rent level and the maximum fair rent is increased by more than that amount).” (https://www.gov.uk/government/publications/rent-standard/rent-standard-april-2023-accessible-version). This was exceeded by the landlord by demanding a 10% increase.
Housing Disrepair
Secondly, at least 4 of the 10 clients seeking advice experienced disrepair in their property. This included black mould, damp, issues with the boiler and/or heating, electrical problems, and instances where the tenant has had to carry out repairs themselves despite reporting the problems to the landlord. In all cases, the landlord had either not responded to the reports or had considerably delayed any repairs.
Invalid Notices
A number of the notices served on tenants were invalid for various reasons.
In two cases, the section 13 notice sought to increase the rent from a date which take effect at the beginning of a new period of the tenancy. For example, in a case where the periodic tenancy began on the 16th of every month, the landlord had served notice to increase the rent from the 1st of the month. This does not comply with Section 13(2) of the Housing Act 1988. In these two cases, the Residential Property Tribunal did not have jurisdiction to decide on the case.
In two cases, the landlord did not actually serve notice correctly. In one instance, the landlord did not provide a Form 4 and therefore the notice was not validly served. In the other instance, the landlord sent an email to increase the rent with an agreement for the tenant to sign. Whilst the tenant did not sign the agreement, they did pay the increased rent, meaning that the clinic advised that they would be unlikely to be successful in challenging the increase. Again, in these cases the Tribunal did not have jurisdiction to decide on the case.
Market Rent
Not all cases were heard by the Tribunal, either for the reasons mentioned above or because the clients withdrew their applications.
In one case heard by the Tribunal, the original rent was ÂŁ1200pcm, with the landlord seeking an increase to ÂŁ2000pcm. The Tribunal decided on a market rent of ÂŁ1700, a 41.7% increase instead of the proposed 66.7%. Whilst this is a beneficial outcome for our client, a 41.7% increase in rent is still a huge increase, well above the averages detailed previously, and may not be affordable to the client.
Section 21 Notice
A number of clients had also been served Section 21 notices by their landlords. Two clients have been served valid notices and are now awaiting a court possession order, but their landlords has still served valid notice to increase rent in the interim whilst they wait for possession.
Risk of Homelessness
One client had sought assistance from the Council as they were threatened with homelessness due to a claim for possession following a s21 notice.
Commentary
There are a number of possible reasons for the increase in prevalence of s13 notices.
Perhaps the most obvious reason is the increasing interest rates and subsequent increases in mortgage costs for landlords. With interest rates being on the increase since December 2021, and the mini-budget announcement in September 2022 causing a spike in interest rates, the increased costs for landlords are often being passed onto renters (https://www.bbc.co.uk/news/business-65890391). The cost of buy-to-let mortgages are forecast to continue to increase by an average of £275pcm by the end of 2025 (https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2023/financial-stability-report-july-2023.pdf). As such, the section 13 notices to increase rent are likely to be in part caused by landlords’ need to cover their increasing mortgage costs.
However, the Government’s plans to abolish Section 21 evictions are likely to also play a part in the increase in Section 13 notices. It is common for a landlord to serve section 21 notice on a tenant to end the tenancy and then re-let the property at an increased rent. However, the end of these no-fault evictions could see landlords increasingly serving Section 13 notices to either achieve the desired increase in rent, or encourage the tenant to move out of the property so that the landlord can re-let the property at the increased rent.
There may also be instances where a combination of these two factors has caused the landlord to serve Section 13 notice. For example, if the increased mortgage costs mean that the landlord can no longer afford to keep the property, they may serve a section 13 notice to encourage the tenant to end the tenancy and move out, so that the landlord can have vacant possession to sell the property.
Implications
The implications of the increasing prevalence of section 13 notices are clear. Renters are likely to feel more financial pressure in terms of affording their rent, or in many instances will simply be no longer able to afford their rent and may need to move elsewhere, or as in the case of one client, may face homelessness.
As demonstrated by the Tribunal’s assessment of market rent for a client – a 41.7% increase compared to the tenant’s previous rent, even where there is a hearing of the tenant’s case, the tenant may remain unable to afford the revised rent cost. An overall trend of increasing rent prices will mean that the Tribunal’s assessments of market rents will also increase. This should also be considered in the context of the general increase in cost of living.
In addition, the prevalence of landlords failing to carry out repairs or keep the property in a habitable condition, whilst simultaneously demanding a higher rent, may indicate an imbalance in the relationship between the landlord and tenant, with the landlord perhaps taking advantage of their tenants.
