The Renters’ Rights Act: rent reviews in focus

The Renters’ Rights Act 2025 (Act) is a watershed moment for tenant protection. For landlords, however, its rent review provisions introduce a fundamental change that will likely make it harder to drive revenue growth going forward.

Annual reviews

Under the Act, landlords will be able to serve notice on tenants to increase rent once a year. On its face, this sounds familiar: a lot of assured shorthold tenancies operate on similar terms.

The difference lies in what happens next. When a landlord serves notice on a tenant to increase the rent, the tenant will now have the right to refer any proposed increase to the First-tier Tribunal (Tribunal) for determination of the open market rent.

If the Tribunal determines that the open market rent is lower than the new rent proposed by the landlord, the rent will be set at this lower figure. However, if the Tribunal determines that the open market rent is higher than the new rent proposed by the landlord, the rent will not be increased beyond the landlord's proposed rent, even though the Tribunal has determined that the landlord's proposed rent is lower than the open market rent. The referral costs the tenant nothing, there is no cost sanction if the landlord’s proposal is upheld, and the new rent becomes payable no earlier than the date of determination by the Tribunal (ie it will not be backdated to the landlord's proposed date for the increase, if this date has passed).

There is no jeopardy for the tenant in making the referral, which means there is every incentive for all tenants to challenge every rent increase, and nothing that landlords can do about it.

Furthermore, the new legislation provides that tenants can also challenge the rent payable under a new tenancy within the first six months by referring it to the Tribunal for determination of the open market rent. Although in this scenario the rent determined by the Tribunal will apply from the date of application to the Tribunal, not the date of determination.

A system under strain

On the basis that there are millions of private sector residential tenancies in England, it is hard to see how the Tribunal will cope with the almost inevitable surge in workload. There is talk of digitisation and even AI to speed matters up, but little evidence – so far as one can see – of this coming to fruition. Algorithms and AI are unlikely to capture the nuance of rent comparables. If delays become endemic, the unintended consequence may be that landlords face months of frozen rents while waiting for determinations. For tenants, delays work in their favour.

Evidence: the new currency

Presumably rent reviews will now hinge on evidence. Landlords proposing an increase will need to justify that the new rent reflects the market. This sounds simple until one considers the practicalities. How is a Victorian villa – north-facing, damp and expensive to heat – valued against a modern three-bed house in the same postcode? Or a row of terrace houses on a street with a major rail station at one end and a park with a duck pond at the other? The commercial property world is familiar with contested rent reviews and the art of comparables ('this was rented for X, but this is better because Y and Z'). Residential landlords may be about to join that club. For residential landlords seeking revenue growth, this is not a peripheral issue: it will become central to financial modelling.

Professional landlords may have the resources to navigate this. But what of the accidental landlord – the individual who moves out and lets their former home? Where will they find reliable market data? Letting agents would be well placed to fill this gap. By collating and sustaining market-specific data on rent reviews they could provide a valuable service to landlords navigating annual rent increases. Such a pivot could help fill the monetary void that will be felt by letting agents as lease renewal work ceases.

Capital values and revenue growth

It is unknown at this stage whether the Act will have an impact on the capital value of let residential properties. In theory it should not, since this will not have been the intention of the Government – and the legislation has been drafted with lenders very much in mind. Lenders are protected (in broad terms) by an ability to continue to sell properties irrespective of whether the tenancy was granted before or after the security was taken.

However, if rent increases are routinely delayed or diluted, projected income streams may become harder to model, and the legislation may have an impact when annual valuations are undertaken. Valuation models will also need to account for increased operating costs as we move to the Private Rented Sector Database and the reality that it will take longer to evict a tenant for non-payment of rent than it does now.

Equally, it may be that the volume of landlords leaving the sector will reduce rental stock and in turn drive rents up (an unintended ironic consequence) which may underpin residential values…

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, November 2025