Section 13 will be the only way for landlords to raise rents when the Renters’ Rights Bill becomes law. Here’s how to prepare your agency for the changes.
LAST UPDATED: 25 Nov
Serving a Section 13 notice is one of several ways landlords can raise the rent under the Housing Act of 1988. But when the Renters’ Rights Bill becomes law next year, that’s going to change.
The shift away from fixed-term and towards periodic tenancies means that Section 13 notices will be the only mechanism landlords can use.
This will increase the pressure on letting agents managing the process for their clients.
However, there are a couple of ways to ensure your team isn’t mired in paperwork and at risk of non-compliance.
In this blog, we’ll reveal what they are, while also exploring the implications of the reforms.
- What is a Section 13 notice?
- How can you serve a Section 13 notice?
- How else can landlords currently raise the rent?
- How will Section 13 change under the Renters' Rights Bill?
- How can agencies strengthen their Section 13 processes?
- Conclusion
What is a Section 13 notice?
A Section 13 notice is a legal document that notifies tenants of a rent increase. They apply to periodic tenancies and not fixed-term tenancies. You can only use a Section 13 notice once per year, even if a fixed-term tenancy converts to a periodic tenancy.
Any rent increases proposed in a Section 13 notice must align with local market rates. Tenants can dispute rent increases through the First-tier Property Tribunal if they think that the increase is unfair.
How can you serve a Section 13 notice?
Landlords — or letting agents on behalf of landlords — can serve a Section 13 notice by filling out Form 4 on the Government website with the following details:
- Tenant’s name and address
- Landlord/letting agent’s name, correspondence address, and contact number
- New proposed rent and the frequency it’ll be charged (week/month/year)
- Existing rent and the frequency it’s charged (week/month/year)
- The first date when rent increased (unless the tenancy is new)
- Starting date for the new rent increase (must not be earlier than 52 weeks after the date the last time rent increased)
- Current and updated council tax, water, and fixed service charges (if included in the rent)
- Landlord or landlord’s agent’s signature
- Date
While this process isn’t overly complex, problems arise when agents tackle Section 13 notices at scale. We’ll come to this later…
How else can private landlords currently increase rent?
In the current landscape, landlords can increase the rent in a few ways besides Section 13. These include:
- Rent review clauses - landlords can include these in fixed-term contracts so they can raise the rent during the tenancy
- Renewed fixed-term tenancies - landlords can increase the rent in a new fixed-term contract with the same tenants
- Written agreements - during a tenancy, the landlord and tenant can mutually agree to a rent increase with a written record of that agreement
Each of these avenues gives landlords the flexibility to raise rents at different intervals. In other words, they can respond quickly if their costs rise.
How will Section 13 change under the Renters' Rights Bill?
When the Renters’ Rights Bill becomes law, periodic tenancies will replace all fixed-term tenancies. Put simply, this means that landlords will only be able to raise the rent through Section 13.
Previously, landlords only needed to give one month’s notice of a rent increase in a Section 13 notice. Under the new legislation, however, they must provide two months’ notice.
Why is the Government proposing reform to rent increases?
In its Guide to the Renters Rights Bill, the Government says its core motivation for proposing these changes is to “prevent unscrupulous landlords [from] using rent increases as a backdoor means of eviction while ensuring rents can be increased to reflect market rates.”
According to Goodlord’s State of the Lettings Industry report, the proposed changes align with tenant sentiment. For example, 39% of tenants said rent increases were unfair, rising to 75% when increases are considered significant.
In theory, the Government’s changes help to level the playing field between landlords and tenants, while simplifying the process of raising rents. But some are concerned that increased tenant flexibility could turn the sector into “Airbnb Lite”.
In a Guardian piece, Chris Norris of the National Residential Landlords Association (NRLA) said: “If you need a place for two months you could go to a private rented sector landlord, [sign a tenancy agreement] and then immediately serve notice.”
To counteract this perceived instability, landlords could reportedly raise rents by up to 10% per year.
Generation Rent’s Dan Wilson Craw, however, maintains that tenants who are looking for short-term lets are still more likely to use platforms like Airbnb, rather than signing tenancy agreements.
How will these changes impact letting agents?
These changes are likely to impact letting agents in a few important ways.
Firstly, more Section 13 notices means more admin for agents. As a result of the new legislation, agents will also need to notify a tenant’s guarantors about the increase, making matters worse.
This isn’t ideal, given that 42% of letting agents already don’t have enough time to manage their workloads, according to the State of the Lettings Industry report.
More manual admin also increases the likelihood of human error. And human error will prevent Section 13 notices from coming into effect, prolonging the rent review period beyond 12 months.
Secondly, as landlords can only raise the rent on one date each year, agents need a scalable way to track them. After all, missing these intervals could leave your landlords out of pocket.
Finally, letting agents need to do everything possible to safeguard their landlords from appeals to rent rises. This is because court backlogs are likely to increase exponentially due to the Renters’ Rights Bill.
These three factors make it essential that your agents are:
- Confident of serving Section 13 notices
- Enabled with the right technology
How can agencies strengthen their Section 13 processes?
Compliance-first software can help you adapt to the Renters’ Rights Bill.
“When we spoke to letting agents, we found that they had a couple of key issues with Section 13 notices. Firstly, they take up a lot of administration time, and secondly, they’re easy to throw out if they’re not compliant,” Goodlord’s Product Lead, Phil Noble says.
To address this, Goodlord created a solution that automates manual tasks and supports agents and landlords to serve compliant Section 13 notices.
Here’s how we can help your agency before, during, and after you serve Section 13 notices:
Before issuing a Section 13 notice
Automating the tenancy journey is one of the most effective ways to ensure efficiency and compliance. Goodlord’s platform allows agents to set up notifications when a tenancy approaches its review period. This ensures that you don’t miss opportunities to raise rents.
Agents can also access Goodlord’s Rental Index (updated monthly) to align any increases with region-specific market rates.
By justifying increases with data-backed insights, agents can reduce the likelihood of appeals, building trust with their clients.
During the Section 13 process
Earlier in this blog, we outlined how the importance of inputting accurate data into Section 13 notices.
Goodlord helps to streamline this process by populating notices with verified tenancy information. This automation allows agents to minimise errors and issue compliant notices with ease.
After issuing a Section 13 process
A clear audit trail is essential to minimise the risk of Section 13 notices being thrown out. Goodlord’s platform generates an audit record for each stage of the tenancy journey. This allows you to position your agency as a trusted expert to your clients.
Conclusion
The Renters’ Rights Bill will have a transformative impact on the lettings industry. And the reforms to Section 13 are only a small part of that.
Working with a trusted technology partner can help you stay ahead of the curve, ensuring you’re ready to adapt to:
- Increased admin
- Increased compliance obligations
- The abolition of Section 21
- Changes to periodic tenancies
Start preparing your agency today by booking a call with us below.👇
This article is intended as a guide only and does not constitute legal advice. For more information, visit gov.uk.
