Rent Challenges: What the First Tribunal Cases Are Telling Landlords

Rent challenges: what the first tribunal cases are telling landlords

One of the biggest concerns surrounding the Renters’ Rights Act was what would happen when tenants began challenging rent increases.

We now have some actual decisions to examine, and they make interesting reading.

An analysis by LonRes identified 47 published rent decisions genuinely determined under the new Renters’ Rights Act rules by 2 September. That distinction matters because hundreds of other tribunal decisions made since 1 May relate to notices served before the Act came into force and are therefore still being decided under the old rules.

So what are we learning?

Perhaps the most important lesson is this: the rent you put on your notice matters.

Under the new rules, the Tribunal cannot determine a rent higher than the landlord has proposed. LonRes found that in around one in five determined cases, the Tribunal considered the property capable of achieving a higher market rent than the landlord had requested, but the landlord was still limited to the amount on their own notice.

That makes good rent research much more important.

At the same time, landlords should not assume that a tenant challenging an increase automatically means the Tribunal will reduce it.

An early case

One early case involved a rent of £3,102.82 per month which the landlord proposed increasing to £3,180. The tenant argued for £3,040 and relied on advertised properties. The landlord supplied evidence of actual agreed rents for comparable properties.

The Tribunal gave greater weight to the landlord’s evidence and confirmed the proposed £3,180 rent.

A useful lesson for HMO landlords

There is a very useful practical lesson there for HMO landlords.

When reviewing room rents, don’t rely solely on screenshots showing rooms being advertised at £850, £900 or £950. An advertised rent tells you what somebody hopes to achieve. Evidence of rooms that have actually let at those figures is considerably stronger.

Suzanne Smith has also highlighted another important feature of the new system. There is no general rent cap in England, but Section 13 is now the route landlords must use for increases, and tenants have a clearer opportunity to challenge the proposed figure against the open market.

That means we should approach rent reviews as a small valuation exercise.

Keep evidence of comparable rooms. Consider:

•  Room size
•  Ensuite facilities
•  Condition
•  Furnishings
•  Location
•  What is included in the rent

For HMOs, bills and the overall standard of the house can make comparisons particularly difficult, so keep evidence explaining why you reached your figure.

 A new development

There is also a new development.

The Government announced on 9 September that it intends to transfer responsibility for initial rent-increase determinations from the First-tier Tribunal to HMRC’s Valuation Office. The aim is to speed decisions and reduce pressure on the Tribunal.

That system is not operating yet. For the moment, tenants challenging a rent increase still apply to the First-tier Tribunal.

The key message for landlords

For us, the message from the first few months is straightforward: don’t be frightened of reviewing rents, but be able to justify them.

*Article supplied by County Rooms.