Varying the Rent
Occupation Contracts
Under the Renting Homes (Wales) Act 2016, once a contract has been agreed upon, rent can be varied only where the legislation allows.
The Act has imported similar provisions to the previous section 13 notice available for ASTs. It's also possible to vary the rent by the parties' agreement in certain circumstances.
The legislation uses the term "vary", so the outlined procedures apply to rent increases and reductions.
Fixed-term
The rent can be varied anytime during the fixed term if both parties agree to the variation (s.134(1)(a)). In such a case, you must provide free of charge within 14 days (s.136)-
- a written statement of the contract as varied, or
- a written statement of the term or terms varied
The contract may have a clause expressing how and when the landlord may vary the rent during the fixed term, but such a term should not extend beyond the fixed term because rent can only be changed during a periodic contract under the rules (see next).
There is a risk that any term in the fixed term for a rent increase would be brought into a periodic contract at the end of the term (s.184(5)), which could cause conflict and produce problems. It's best to avoid rent increase clauses with occupation contracts as they're unnecessary anyway.
Periodic
Where the contract is rolling periodically (from the outset or after a fixed term ends), the rent cannot be varied by agreement (s.122), but instead, it must be changed by the prescribed means.
Renewal
A periodic renewal contract could be issued at any time with a new rent, and the varied rent will be agreed upon.
Section 123 notice
A similar provision to the previous section 13 is available. There is a new prescribed form, "RHW12," and two months' notice is required (s.123(2)).
The first variation can start on any day during periodic (s.123(3)(a)), so in theory, if there's a six-month fixed term, the first notice can be served once periodic (month 7) by giving two months' notice. The landlord cannot serve the notice during the fixed term to start during the periodic term, and the notice requires a date to be entered when the new rent will begin after two months.
Section 123 doesn't expressly specify that the date for the new rent must be the start of a period of the contract, but it is best practice for the date to be the next rent day after two months from service. An additional four days should always be allowed for service of the notice.
After the first rent variation, any subsequent notices must specify a date for the new rent that is at least one year after the date the previous rent increase took effect (section 123(3)(b)). This means you can serve the next RHW12 notice less than 12 months after the last one, as long as the start date for the new rent is at least 12 months after the effective date of the previous increase.
For example, if the first RHW12 was served in April with the rent increase taking effect in June, the next notice could be served the following April (10 months later), provided the new rent does not begin before the following June, one year after the previous increase took effect.
For an existing tenancy (converted contract), that one-year period includes any previous variation (para. 15(1), sch.12).
The rent will be varied from the date specified in the notice (s.123(1)), and no written statement of variation is required (s.128(1)).
If you prefer, you can agree with the contract-holder on the new rent before issuing the notice. However, giving a letter confirming this will not work, and you must follow the notice procedure.
A periodic contract should not have a term for increasing the rent, and the rules only allow rent to be varied via the section 123 notice. Only fundamental, supplementary and additional terms may be changed by agreement during periodic, but rent is not a term; it is a key matter.
Rent Assessment Committee
Under section 13 of the Housing Act 1988, there is a provision to allow a tenant to appeal to the Rent Assessment Committee if they feel the rent proposed in the notice is significantly above-market rent where the tenancy was assured or assured shorthold.
Contract-holders of a tenancy converted and where section 13 applied before conversion (periodic assured or assured shorthold) retain the right.
For new occupation contracts from 1 December 2022, there is no right of appeal for an application to the Residential Property Tribunal to determine market rent. That said, a contract -holder may take legal advice as to whether it is feasible for them to take action to court under the Consumer Rights Act 2015 regarding the magnitude of the increase.
Varying consideration
Where consideration other than rent is payable under a standard occupation contract (for example, the contract-holder is employed by the landlord), you may vary the amount of consideration during the fixed term or periodic by agreement between the landlord and the contract-holder (s.124(1)(a) for periodic).
If varied by agreement, you must give a written statement of the varied contract free of charge within 14 days.
Alternatively, and only during periodic, the landlord may give the contract-holder a notice setting out a new amount of consideration to take effect on the date specified in the notice, which must be at least two months (s.124(2) & (3)).
The first notice may specify any date, and subsequent notices must specify a date not less than one year after the last date on which a new amount of consideration took effect.
If the notice method is used, a written statement is not required to be given (s.128(1)).
Failure to provide a written statement
As discussed earlier, if the notice procedure has been used to vary the rent or consideration, a written statement is not required to be given.
In all other circumstances described where a written statement is required, but the landlord fails to comply, compensation is payable for daily rent for up to when the statement is provided or up to 2 months plus interest.
Rent increases before the commencement
Rent increases and appeals made under section 13 of the Housing Act 1988 before commencement continue, provided the process was commenced before the Act commenced (regulation 10, The Renting Homes (Wales) Act 2016 (Saving and Transitional Provisions) Regulations 2022).
Rent Act (Regulated) Tenancies
Regulated tenancies are governed by the Rent Act 1977, which will all have been created before 15 January 1989.
The Rent Act allows the tenant (or the landlord) to apply to have a 'fair rent' registered for the property, and once this has been done, the fair rent is the only rent the landlord can charge.
Rents are fixed by the local office of the Rent Service, and they do not consider the impact of scarcity on the market value of rented accommodation. You can obtain the local Rent Service contact details from the council's housing advice service.
If a fair rent has been registered, a new registration cannot be made less than two years after the date the existing registration came into effect unless:
- landlord and tenant apply jointly or
- there has been a change of circumstances, for example, significant repairs, improvements or changes in the tenancy terms.
It is in the landlord's interest to apply promptly for rent increases every two years. Otherwise, the rent charged might fall behind market rents because the increase is capped under a complicated calculation set out under regulations - The Rent Acts (Maximum Fair Rent) Order 1999.
If the rent has not already been registered, a landlord can increase the rent if the tenancy agreement or contract allows for rent increases. If the agreement does not allow for rent increases, it can only be increased if:
the landlord and tenant make a formal rent agreement which must follow special rules or
the Rent Officer registers a fair rent.
Other tenancies
Rent Review Clauses in the Tenancy Agreement
Usually, it is not possible to review the rent during the tenancy's fixed term unless there is a valid rent review clause or the tenant agrees to the review. If the tenant agrees, this should be recorded (perhaps by seeking the tenant's signature on a new tenancy agreement). You can also include a clause to review the rent within the tenancy agreement. The clause must comply with the unfair terms provisions of the Consumer Rights Act 2015 and be fair. Clauses allowing the landlord to review (and mainly to increase) the rent as he sees fit are likely unenforceable. Any increase upon a valid rent review is more likely to be enforceable if justified by a recognised/established factor (such as significant improvements to the property or general cost increases reflected in the Retail Prices Index).
Clauses which provide for substantial increases will generally be void. (for example, the rent increase is not to achieve a fair rent for the property but to increase the rent to a level causing rent arrears to make possession easier).
Rent Increase by Agreement
It is also possible to review the rent by seeking the tenant's signature on a document (such as a copy letter to the tenant proposing the new rent) which confirms the agreement. Landlords wishing to do this are encouraged to speak to the tenant first to gauge whether or not they are content with the proposed new rent.
Once an agreement has been reached, the landlord should send a formal duplicate letter proposing the new rent and asking the tenant to sign, date and return one copy to confirm their agreement. If the tenant fails to return the letter or pay the new rent, the rent will not have been validly reviewed. The review will be less susceptible to challenge if the landlord gives the tenant something in exchange for any rent increase – for instance, allowing the tenant to stay longer than would otherwise be the case or improving the facilities or condition of the property. If this is the case, it should be recorded in a letter from the landlord to the tenant.
It is impossible to increase the rent unilaterally by simply sending a letter to the tenant telling them their rent will be increased from a specific date. If the tenant agrees to this and starts paying the rent, the increase is agreed upon, but they can refuse to pay the increase if the tenant does not agree.