Section 13 rent increases and contractual provisions in the Upper Tribunal

Julia Michalczyk considers some recent Upper Tribunal decisions on rent increases, a helpful reminder that registered providers must ensure that they follow the correct procedures when increasing the rent.

The Regulator of Social Housing sets the Rent Standard and Registered Providers of Social Housing must charge rent in line with it.

The Rent Standard takes a formula-based approach to rent setting and rent is usually increased once a year under the terms of a rent review clause in a tenancy agreement, or under statue.

Section 13 of the Housing Act 1988 allows landlords to raise the rent on a periodic assured or assured shorthold tenancy, by giving the tenant notice of increase in the prescribed form. If a tenant disagrees with the rent increase, they may refer the notice of increase to the First-tier Tribunal.

The parties can contractually agree on the mechanism for increasing the rent, if they do, they cannot also make use of the statutory provisions in s.13 of the Housing Act 1988.

In Chouhan and Thomas v The Earl’s High School, the Upper Tribunal agreed with the First-tier Tribunal that they had no jurisdiction to determine a rent increase when the tenancy agreement included a contractual mechanism for such increases.

Recent cases before the Upper Tribunal highlight the differences between the statutory and contractual mechanisms for the rent increase.

Section 13 rent increase

Peabody Trust v Welstead  [2024] UKUT 41 (LC), 19 February 2024

Ms Welstead was an assured tenant. In February 2022, Catalyst Housing Ltd – her former landlord – served her with a rent increase notice. The notice proposed to increase her rent from £171.03 to £191.78 per week (which included an increase in the fixed service charge from £43.03 to £58.53).

Ms Welstead referred the increase to the First-tier Tribunal. The First-tier Tribunal decided that Catalyst was only entitled to recover a fixed service charge of £39 because the management charge was excessive.

The reversion of the tenancy had since been acquired by Peabody and they appealed to the Upper Tribunal. The appeal was dismissed. There was no evidence before the First-tier Tribunal as to the amount of the service charge, Ms Welstead had requested that it be justified by Catalyst and Catalyst had not done so. As such, the First-tier Tribunal, when determining the rent, was entitled to rely on its own expertise and experience.

Contractual provisions for rent increase

Salvation Army Housing Association v Kelleway [2024] UKUT 53 (LC), 21 February 2024

Mr Kelleway was an assured tenant. His tenancy contained provision for the review of his rent each year. In 2023, Salvation Army Housing Association (SA) served him with a rent increase notice pursuant to s.13 of the Housing Act 1988.

Mr Kelleway referred the matter to the First-tier Tribunal. SA applied to strike out the reference on the grounds that the tenancy was a contractual periodic tenancy and, as such, the First-tier Tribunal had no jurisdiction to determine the rent. SA argued that the decision to serve s13 Housing Act 1988 notice had been made in error.

The First-tier Tribunal struck out the reference but on the grounds that the notice was defective. SA appealed to the Upper Tribunal against the reasoning of the First tier Tribunal and the appeal was allowed. The Upper Tribunal confirmed that it lacks jurisdiction to determine a rent increase when such increase arose out of a contractual mechanism contained in the tenancy agreement.

Points to consider

The above cases are a stark reminder that landlords must ensure they follow correct procedures when increasing the rent, and to always consider incorporating a rent review clause to all their tenancies. The contractual mechanism for rent increase allows a greater flexibility for the landlord and avoids the risk of rent determination by the First-tier Tribunal. It is important to note, however, that a rent review clause no longer applies to the statutory periodic tenancy that arises after the expiry of a fixed term.

Julia Michalczyk is a solicitor at MSB Solicitors.