Annual Report: Market Value and Rent Rises

The complaint was that the agent did not charge market rent or implement rental increases during the ten year period in which the property was let, until this was specifically requested by the landlord.

The agent commented that the property required refurbishing and that, as such, they did not feel that rent increases could be justified. They also said that there was no obligation upon them to consider annual rental increases during periodic tenancies.

In this case, the agent’s Terms of Business provided that they would provide advice as to the likely rental income for the Property. The agent said that they did so between tenancies, however, there was no evidence to support this in their branch file.

In 2012 a tenancy commenced, continuing on a periodic basis after June 2013 and still in place at the date of the complaint in 2017.  The agent commented that they had no contractual obligation to advise regarding the market rent whilst this tenancy was ongoing. However, the Tenancy Agreement specifically provided for an annual rent increase that was never implemented.

The Ombudsman accepted that the agent may have felt any increase to the rent was unjustified as a result of the condition of the property.  Depending on the rental market, it may also often be in a landlord’s interest to retain a reliable tenant at a lower rent than to risk void periods and potentially unreliable tenants at a higher rent. However, the agent should have explained their position to the landlord and given the landlord the opportunity to consider renovations to the property to support any increase in rent. As it was, concerns were not raised with the landlord regarding the standard of décor and furnishings in the property until 2016.

Of course, it is inevitable that when a property is tenanted for a significant period, over time fair wear and tear will lead to deterioration in the décor. The landlord in this instance was aware that the property had been let since 2006 and that in the subsequent years the property had not benefitted from any substantial renovations. However, it was the role of the agent to bring to the landlord’s attention what they considered to be the impact of this on his rental income. The agent did not demonstrate that they did so. Further, it was noted that a significant increase to the rent was agreed by the tenants in 2016 without any work being carried out at the property.

Outcome

The complaint was supported as:

• The agent did not advise the landlord regarding market value rent between Tenancies
• The agent did not implement the annual rent increases allowed for by the Tenancy Agreement
• The agent did not notify the landlord in a timely manner of issues with the condition of the Property which they felt were reducing its rental value

The award for this complaint was to reflect the avoidable aggravation caused as a result of these shortcomings in the service provided by the agent. It was not, possible, however, for the Ombudsman to quantify any potential loss of rental income as it is not possible to determine what, if any, rent increases may have been agreed, or whether the property would have remained tenanted throughout, had the agent acted differently.

An award of £400 was made in compensation.  This was in full and final settlement of the dispute.