You’ll no doubt be aware that the cost of living is rising significantly in the UK. As if you hadn’t noticed already from your own costs increasing, the crisis has also dominated the news headlines.
It’s sadly inevitable that some people and families will begin to struggle to keep up with costs relating to their homes. Whether you’re a homeowner or tenant, if your finances are already tight and you feel that further inflation could impact on your ability to afford your mortgage or rent, it’s wise to plan ahead and know what your options could be.
How the crisis might affect you if you’re a homeowner
The Bank of England has been increasing interest rates in a bid to bring inflation down, after years of very low interest rates. If you have a mortgage already, these rate increases will be passed on to you as a borrower, pushing your monthly payments upwards.
You may notice the increase more if you’re currently on an introductory offer such as a fixed-rate mortgage and you may struggle to find competitive new deals to switch to when it expires. All of this makes it very hard for any homeowner to avoid mortgage payment increases.
If your payments should start to get out of hand – even after making economies in your other spending – it is best to speak to your mortgage lender first. This may be daunting, but it is best to start the dialogue with them early as it may help avoid unauthorised mortgage arrears. You certainly won’t be alone and lenders will have plans in place to help borrowers navigate such a difficult time.
How the crisis might affect you if you’re a tenant
If you’re a tenant of a property, your landlord may look to increase your rent to keep it in line with inflation. However, depending on the nature of your tenancy, there may be limitations on how soon they can do this, and the amount of the increase.
The first step to take if your rent becomes hard to afford is to review your tenancy agreement to see what right your landlord has to increase your rent. If your tenancy is on a fixed term agreement, you will need to find out the date your tenancy ends, as well as the dates and frequency of any rent reviews. This should help you anticipate how long you have at the current level before your rent might increase.
If you are still within a fixed term of a tenancy agreement, and the terms within do not contain a rent reviews clause, then your landlord is not permitted to raise your rent until the end of that term. In the alternative, if your tenancy contract does contain a rent review clause, then any rent increase can only be increased to a maximum of what would be considered “market rent”. This means that the rent can be similar to other rental properties in your local area.
Should you find yourself at the end of your fixed term, your landlord may ask you sign a new fixed term agreement, again at this point your rent can be raised, you should check the rent clauses within your tenancy agreement carefully prior to signing.
In certain circumstances, if there is no rent review clause within your tenancy agreement and your contract is now out of fixed term, your Landlord can still increase your rent, however they are legally required to do so by using a prescribed notice form known as a “section 13” notice. This is a prescribed form, which must be completed correctly, otherwise the notice can be deemed invalid.
If the date of a potential rent review is near, then your landlord may have grounds to increase it. There is no legal limit on how much they can increase your rent by, but Government guidance says that it should be fair. Increasing the rent by too much could make it uncompetitive anyway. That would make it harder for them to find another tenant if you left, especially in the current economic climate.
Your landlord should also give you reasonable notice of any increases. Typically this might be six months’ notice for an annual tenancy, although with the abrupt increase in the cost of living, landlords could argue that a shorter notice period is reasonable.
You are always entitled to a notice period prior to your rent increasing, how long your notice will be will depend on your tenancy agreement. If you are now out of fixed term, and your rent payments are made monthly, then your landlord is required to provide you with one month’s notice of the rent increase.
If your tenancy is a yearly one, then you would be entitled to 6 months’ notice. Should your Landlord be required to use the section 13 notice to inform you of a rent increase, then they will only be able to increase your rent once within a 52 week period.
You may prefer not to speak to your landlord in advance, because raising the subject may simply remind them to review your rent. If they should raise the subject with you first, it is best to discuss things with them amicably.
If they should increase your rent and you think it is unfair, you may decide to challenge it. Paying the increased rent may constitute acceptance of it, which makes it much harder to argue later on that you can’t afford your increased rent. However, you should still at least pay the previous level of rent, to show that you have kept your commitments under the tenancy.
If you’re unable to reach an agreement with them, or if you should fall behind on your rent, then your landlord is entitled to provide you with a notice for non-payment of rent, once you have fallen behind on rent by at least 2 months. It is therefore essential that you continue to communicate with your landlord, to demonstrate that you are making all efforts necessary to make your rent payments, as you are now at risk of losing your home.
Practice demonstrates that it is usually lack of communication by the tenant which then results in the Landlord issuing the notice and seeking to evict a tenant. Most Landlords would much prefer to resolve arrears by way of a rent repayment schedule, as the cost of eviction and finding a new tenant can be much more.
Eviction is a very big step to take though and there are rules that your landlord must follow in order to evict you legally. At this stage and having tried to resolve things amicably, you may benefit from specialist legal advice to help you resolve the dispute.
Better times ahead
Whether you’re a homeowner or tenant, we hope that this article has helped you and that you’re able to manage the rise in the cost of living without it affecting your home. As with any legal issue, trying to resolve things amicably first is the best approach.
Seeking legal advice
If you need any advice on property disputes, contact us on 0114 350 4099 or contact us through the website. We’ll discuss your circumstances with you and there is nothing to pay for the first call. We’ll explain any fees in advance before you decide to work with us.