Renters’ Rights Act 2025 – rent increases

The new assured periodic tenancy regime under the Renters’ Rights Act 2025 (RRA) will be brought into force on 1 May 2026.

A key challenge for the PRS/BTR/Co-living and SFR markets is how landlords will implement rental increases with tenants who occupy under assured periodic tenancies (APTs) who remain for one or more years. The main concern for this market is the potential for there to be delays in applying a new rent if tenants challenge proposed increases. The impact of such delays will, of course, be dependent on the degree of tenant churn and the average length of stay for any particular asset.

Because the RRA prohibits the concept of a fixed term, all relevant residential lettings will become APTs on 1 May 2026, ie they will be monthly (or weekly) tenancies terminable only by either (a) the tenant serving two months’ notice at any time or (b) by the landlord using one of the grounds for possession. Accordingly, the rent payable under these tenancies will be a monthly (or weekly) rent.

What is the impact of the RRA on rent increases?

The RRA introduces new requirements and forces landlords of APTs to use the rent increase regime under the Housing Act 1988 (HA). The rent may only be increased by using this statutory process.

Any rent review/increase mechanism in the terms of the tenancy will be of no effect. Accordingly, it is not possible to have any increase in the rent on any basis other than through the statutory process. This means that it is not possible to have a rent free or reduced/discounted rent period where the rent “increases” the undiscounted level after the rent free/discounted period.

What is the rent?

For the purposes of the statutory rent increase challenge process, rent excludes variable service charge but includes any rent attributable to the use of furniture within the dwelling and any rent payable which is a fixed amount payable, directly or indirectly, for services, repairs, maintenance, improvements or insurance or the landlord's costs of management. Accordingly, the market standard “inclusive rent”, which includes a variety of operating costs, will be regarded as “rent”.

If there are car parking facilities, some landlords may decide to lease (or licence) those separately from the letting of the dwelling/residential unit. The rent or licence fee payable in respect of such separate lease/licence should not be governed by the rent setting/increase arrangements under the RRA or HA.

Some landlords have used a “pet rent” arrangement whereby an additional/ancillary rent is payable if the occupier wishes to keep a pet at the property. Under the RRA landlords of APTs will be required to consider tenant’s applications for consent to keep a pet and must act reasonably in considering such application. The RRA does not specifically address the concept of a “pet rent” as such but the requirements relating to increasing rent will apply. This means that:

• A pet rent could be included as a rent at the beginning of a new tenancy where the prospective tenant requests consent to keep a pet. However, this will simply be part of the “rent” for the purposes of any tenant challenge.
• If no pet rent is included as rent at the outset of a tenancy (eg a tenant makes a request after the tenancy is granted), rent cannot be increased other than by way of the annual section 13 process.

How is the rent increased?

In summary, if a landlord wishes to increase the rent for an existing tenant:

• The landlord may only increase the rent “annually”.
• The only permissible way of increasing rent during a tenancy will be for a landlord to serve a “section 13” notice (this is a reference to section 13 of the HA) (form 4A) stipulating the proposed increase in the then passing rent. The landlord must give the tenant a minimum of 2 months' notice of the proposed rent increase (accordingly, the notice can be served at month 10 to take effect at the anniversary of the start of the tenancy or the date the previous increase took effect. If the section 13 notice is served at, say, month 11, then the rent cannot increase prior to month 13, and so on).
• The tenant may either expressly accept the proposed increase or do nothing, in which case the proposed rent increase will take effect (but no earlier than on the date stipulated in the section 13 notice, subject to the minimum two-month notice period).
• The landlord may also accept a tenant’s offer of a lower rent than proposed by the landlord in the section 13 notice.
• The tenant has the right to challenge the proposed increase by serving a statutory notice (Rents 1) (within 2 months of receiving the landlord’s notice proposing the increase).
• If the tenant challenges, then the rent will be determined by the First Tier Tribunal (FTT). The FTT will decide the open market rent. The FTT will determine the open market rent by reference to the assumptions and disregards set out in the HA. The FTT may not award a rent higher than the rent proposed by the landlord in the section 13 notice and the FTT may decide the open market rent is lower than the passing rent.
• The open market rent determined by the FTT will usually become payable from the date of the FTT’s decision – it will not be backdated. The FTT may defer the application of a rent increase that it determines by up to two months if the FTT considers that the rent increase will cause undue hardship to the tenant.
• There is no set period for the FTT to make its decision.
• The next annual rent increase permitted will run from the date of the FTT’s decision, so there is a potential for compounded delays.
• It is worth noting that the government may, in the future, permit backdating. The government has specifically acknowledged the potential risk of undue delays and said they will (a) consider backdating if this occurs and (b) streamline the FTT process.

Can the tenant challenge the initial rent?

Yes - in addition to the tenant’s right to challenge a proposed increase in rent, the tenant may also challenge (through the same section 14 process described above) the initial rent payable under a new tenancy. The tenant has six months from the beginning of the new tenancy to challenge the initial rent.

Would you like to find out more?

Given the above limitations on how landlords’ approach setting and increasing rents there are a variety of creative approaches being considered by operators. If you are interested in this topic and would like to find out more, please contact John Kelsey.