Eventually, property managers may need to increase rent to maintain profitability or simply cover operational costs. The reason could be anything. This process requires creating a letter to raise rent and get it approved by the tenant; however, it requires other considerations as well, for instance, giving the notice period, documentation, and clarity so that the whole process is completed smoothly.
Ideally, a clearly written rent increase noticecan assist in keeping residents, or if the increase is too high, they may leave for personal reasons. No matter what, you should try your best in any situation that comes up after sending the rent increase notice. It requires explaining everything about the notice, what the consequences will be for nonpayment, and also listening if the tenant negotiates.
This blog will help you understand the process of “how to notify a tenant of a rent increase,” reasons to justify the increase, and more.
When is it legal to increase rent?
Increasing rent might be considered unfair when the tenant doesn’t agree to the proposed increase because of violations of rent control laws. Thus, a landlord needs to check the relevant laws, including State law, Local law, and the rental agreement, before deciding to increase the rent, ensuring it remains a legal process.
Moreover, a proper rent increase notice must be sent stating the new amount of the rent, the effective date of the increase, the reason for the increase (if applicable), the notice period required by law, the payment methods available, and any other relevant terms and conditions.
For instance, local regulations might restrict you to a 1% rent increase for a one-year renewal and a 2% rise for a two-year renewal. These limits are often linked to inflation or determined annually by a government body based on economic conditions.
The law also specifies whether there is a minimum notice period required to notify your tenant about a rental increase notice. Typically, for month-to-month agreements, providing notice for an entire rental period in advance is sufficient. For annual leases, it’s common to give 30 to 60 days before the lease ends if you plan to increase the rent or switch to a month-to-month arrangement.
Your rental agreements may set additional limits or notice periods. Also, you might guarantee your tenant a maximum rent increase or a more extended notice period than required by law. However, your terms generally cannot provide fewer rights or require tenants to waive certain legal protections. Therefore, you cannot ask a tenant to consent to a rent increase in excess of the amount allowed by law. If your city or state has strong tenant protection laws, discuss the required procedures with a lawyer before issuing a notice.
What type of notice must be provided to tenants?
When notifying tenants about a rent increase, it’s essential to follow proper procedures to ensure clarity and avoid disputes.
A rent increase letter is a formal document sent to a tenant to inform them about the increase in monthly rent. It is important to note that when sending a rent increase letter, it must be in writing, i.e., it must be in written form. This is because if the agreement between the two parties is merely a verbal arrangement, it may lead to unnecessary disputes.
A landlord may also consider sending certified mail. However, it is better to provide formal notice or have renters sign a Lease Amendment or a new lease acknowledging the increase.
Do rent increases need to be based on market value or improvements?
A rental increase notice may be required under specific rent control or rent stabilisation laws, primarily if the increase is based on market value or property improvements.
However, in most cases, landlords are free to set a rent amount that aligns with what the market can bear. While some landlords prefer to highlight the added value behind the increase, it’s typically not necessary to include details beyond the new rent amount and the effective date of the change.
Consider factors that justify rent increases
Before sending a rent increase letter, it's essential to understand why you're raising your tenants' rent. Some property managers raise rent by the maximum allowable amount with every lease renewal, while others prefer to increase it minimally to reduce turnover and maintain good tenant relations. It's also crucial to be transparent about the reason behind the increase. If you're issuing a letter to raise rentdue to inflation, for instance, be upfront about it. Additionally, explain the benefits of the increase and how it will contribute to the property's upkeep or improvements.
There can be various reasons that may prompt you to send a rent increase notice other than personal benefits, such as:
- Local charging patterns change with the local government increasing property taxes.
- Incurred losses rise because of calamities or market fluctuations in insurance.
- Major work, including re-roofing or repairing or replacing old pipes, amongst others.
- Changes that may be necessary because of deregulation or some other legal actions regarding rent control.
Can tenants refuse or fight a rent increase?
Yes, tenants may refuse or contest a rent increase notice, but only if the rent increase is unlawful or violates existing tenancy laws. If everything outlined in the notice complies with the rules and regulations, then it is entirely legal to issue arent increase notice. Once the notice is deemed lawful, tenants can only negotiate with the landlord or property manager but cannot outright oppose it.
If the tenant is unable to afford the increased rent, they may request a reduction in the proposed amount or cite financial hardship or personal circumstances. If an agreement cannot be reached through negotiation, it is advisable to ask the tenant to sign a Non-Renewal Notice. This notice should state that the tenant must vacate the property before the end of their lease term.
Furthermore, suppose the tenant is uncooperative or stubborn and refuses to vacate the property. In that case, you may need to pursue legal action, which could involve filing for an eviction order through the appropriate legal channels.
Mention consequences for nonpayment
After sending the rental increase notice, the tenant may take the notice for granted, or the reaction could be the opposite, such as disagreement or concern. This is why it is essential for you, as a landlord, to discuss the consequences of nonpayment of rent. Therefore, you are now better equipped to address the question of "how to explain rent increase to a tenant." You can do so in the following ways:
Clarify that the rent increase is not a penalty
If tenants feel they’re being treated unfairly, they might start seeking other housing options, which could cost you more than keeping rent stable. A good tenant is valuable—express your appreciation in your rent increase letter. Keep it simple and professional without overdoing it.
Use impartial language
Avoid being apologetic or emotional in your tone. While no one likes a rent increase, overly kind words can come across as insincere or hypocritical. Instead, maintain a polite and impartial tone in your communication.
Request confirmation from the tenant
Request a response from renters on the rent increase notice. It would be ideal if they sent an email indicating that they accepted the conditions. However, you may also request a written answer that is delivered in person if you are unable to communicate via email for any specific reason.
Start your Rent Increase Letter with Robot Lawyer
Notice of rent increases and decreases is a proactive step that makes the process straightforward and hassle-free. In case you require assistance in notifying tenants about a rent increase, we can quickly generate accurate, professional documents in minutes.
Avoid misunderstandings – get the right decision today with Robot Lawyer! Contact us at contact@robotlawyer.co if you want to know when you can raise the rent or how much or what kind of notice you need to give in your area.
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Frequently asked questions
Q.1. What's the most a landlord can increase rent?
A.1. There are no legal restrictions on rent increases by a private landlord. Nonetheless, the government requires landlords to be reasonable and fair so that the rise matches local market prices. For social housing, there is a cap of 7.7% for 2024-25.
Q.2. Can a landlord increase rent by more than 10 percent?
A.2. You can increase rent by more than 10% in the rental increase noticeonly if the tenant agrees in writing. For a fixed-term tenancy, rent can only be increased if the tenant consents. Otherwise, rent increases must align with the terms specified in the tenancy agreement.
Q.3. What are the rights of a tenant?
A.3. In case a tenant receives a rent increase notice, they have the following rights to challenge against the notice or dispute the notice.
- Tenants can try to negotiate with their landlord for a more minor increase.
- Can challenge the increase with a rent assessment committee or rent officer within 21 days of receiving the notice.
- Tenants can apply to a tribunal to decide if the rent increase is fair.
- If a renter pays rent once a week or once a month, the landlord has to give them at least one month's notice. If the rental agreement is for a year, the landlord has to offer six months' notice.
Q.4. What is a yearly tenancy?
A.4. Most tenancy agreements are signed for a set term. Usually lasting six or twelve months, these fixed contracts might be longer or shorter depending on necessity. However, once this set time expires, the renter is not required to vacate the property.