When is a Landlord Allowed to Raise Rent?
A landlord or property manager can raise the rent on their tenants, but they must abide by certain rules and regulations. Landlords must give their tenants a rent increase notice before raising the rent so that the tenant has time to prepare for the increase.
You may decide to raise the monthly rent because of changes in the cost of living or the addition of new improvements so that property details change. Everything, however, must happen within local law or state rent law. If a tenant feels that a proposed increase is unjustified, he or she can challenge the increasing rent in court.
How frequently can you increase rents?
A rental market is a competitive place, but that doesn't mean local laws can go ignored. Raising rent has a proper time and place.
Most of the time, rent prices can't change during the lease period stated in a rental agreement. A new monthly rent can come into play when that lease ends, but that change belongs in a new lease. Even if your tenant moves to a month-to-month lease, you'll need to provide a proper rent increase notice, giving them time to opt out of renewing their lease.
A rent hike can't occur just because you feel like it or else you face charges related to an illegal rent increase. You can, however, prepare in advance to increase rent by putting information into your initial rental agreement. You can specify that a rent increase of a specific amount will take place once the current lease is up.
One way to anticipate the ideal rent increase so far in advance is by assessing the average increase in the cost of living. For example, if the cost of living increases, on average, by two percent, you may want to up the rent by the same percentage within the lease agreement amount should the tenant renew.
Factors to consider before increasing monthly rent
There are several reasons, from your perspective, why rent increases are necessary. However, what's driving you to raise the rent may not impact what the tenant can pay. This can mean the current rent is all they can afford, and an increase could lead to a vacant rental property. And, a vacant rental property could mean more money lost than if you simply don't raise the rent.
So, before preparing that rent increase letter, consider these key factors to help influence your decision.
Your own costs
If, as the landlord, you're covering additional expenses associated with your rental property, you may need to increase the rent in order to cover rising costs. This includes expenses like property taxes and utility bills.
If you're not paying for all of these additional costs, but you know prices are rising, you might want to give your tenant a break and keep the rent the same when the current lease ends.
Upgrades and new amenities
You also need to consider your overall investment in the property. Have you made any upgrades or added new amenities recently? If you've made significant improvements to the home, you can justify a larger rent increase the next time you draft a lease.
However, if changes align more with fixes related to repairing normal wear and tear, like painting the walls or installing new carpet, you might not have enough evidence to justify any changes.
Aligning with market trends
Another thing to review as a lease term comes to an end is the real estate trends in your area.
Check how your home matches up to other rental properties nearby. If rents have been stagnant or decreasing, then it's more difficult to justify a rent increase.
Additionally, if there are a lot of vacant rental units in the area, then you may have trouble bringing in a new renter if you raise the rent too much.
The tenant's financial situation
It's also a good thing to consider the financial situation of your tenants and how monthly rent factors in. If they're having difficulty making ends meet, then you may want to hold off on any rent increase notices. Especially if this is a good tenant you want to keep, consider no new increase.
You could also discuss with them whether they could afford a certain amount if you added it to their new lease.
How to legally increase the rent?
If, after weighing all the pros and cons, you do decide it's time to up the current rate of rent, there's a proper process to follow. You must provide enough notice for your renter to decline the renewal of their lease, and you must give them that notice in writing.
Be very specific about the amount of the rent increase and the date when the increase will take place. If you're worried about an email notification getting lost in the shuffle, you can always send this letter via registered mail to establish a solid paper trail.
After giving written notice of the rent increase, your tenant has two options. They can either agree to the change and sign a new lease or leave. This new lease will include the new rent amount, as well as the date the change will take place.
The other option is to move out and find somewhere else in the city that's more affordable. If they decide to move out, they must give you written notice at least 30 days before the move-out date.
How many days' notice must you provide?
The answer to this question depends on the laws in your state. Most states require a landlord to give at least 30 days' notice before increasing the rent. However, there are a few states that require 60 days' notice and others that have no requirements.
What to include in a rent increase letter?
A rent increase letter should include the following information:
- Name and address of the tenant
- Name and address of the landlord
- Amount of the rent increase
- Date when the increase will take place
- Reason for the increase
- Any other information the landlord wants the tenant to know
- The signature of the landlord or the landlord's representative
Using a template may make it easier to get your notice written.
Incorporate new rent payment methods
Be sure to also let your tenants know about any new rent payment methods you are offering.
For example, if you're now accepting online rent payments, be sure to include this information in your rent increase notice. You can also include information about any late fees or penalties you'll charge for late rent payments.
Document if rent increases will impact the security deposit
If you're planning to increase the rent, you also need to include information about how a rent increase will affect the security deposit, if at all.
For example, if you're increasing the rent by $50/month, you may want to increase the security deposit by $50, as well.
However, if this is a good tenant who you know has already treated your property well, you can just hold onto the security deposit they've already paid and not ask for additional money.
How to deal with rent control?
While it's not an issue you have to worry about in every state, rent control can impact how, and if you can require tenants to pay more for rent. Rent control is a price limit on how much you can collect in rent. It keeps rent prices from ever going beyond a certain rate or percentage. Cities can cap the dollar amount or set a percentage for legal rent increases each year.
If you live in a city with rent control, make sure you adhere to the legal rental limits as a landlord.
How to deliver a rent increase notice?
The best way to deliver a rent increase letter is by certified mail, so you have proof that the tenant received the letter. You can also hand-deliver the letter, but be sure to get a signed receipt from the tenant. And finally, you can email the rent increase notice, but only if the tenant has agreed to accept electronic communications from you.
No matter how you send it, the rent increase letter must arrive within the proper notice period.
Keep all signed documents for documentation purposes
After you've delivered the rent increase letter, be sure to keep a copy for your records. You should also keep any signed documents from the tenant, such as a receipt or an agreement to pay the increased rent amount.
These documents provide valuable evidence if there are ever any disputes.
What happens if my renter says my rent increase isn't legal?
If a tenant feels that the rent increase is unfair, he or she can try to negotiate. They can explain why the increase is unfair and ask that you reconsider.
If a tenant believes your increase goes against the law, and you refuse to rescind it, they may take legal action against you. They can file a complaint with the local housing authority or even take you to court. This is why it's important you're familiar with local laws in your area before initiating any kind of rent increase letter.
Can a landlord raise the rent?
Given the proper notice period and notification in writing, most landlords have the ability to raise rent within certain periods of time.
As long as you're aware of the landlord-tenant laws in your area, and handle things legally, there's no reason you can't raise the rent to stay competitive in your rental market and continue to make a profit on your property.