There are a variety of situations that can make it necessary to increase rent for your property. Rising insurance premiums and taxes along with increased maintenance fees can all justify a rent increase. Tenants rarely have a positive reaction to a rent increase, but there’s often no other option to maintain operational costs. Here are several tips on how to write a rent increase notice that will make the process as easy as possible for both you and your tenants.
The format of a rent increase notice, or letter, is fairly straightforward. Begin by addressing your tenant by name and address, then explain that the rent increase will happen. State the date on which the increase will begin and specify the amount of the increase as well as the new monthly total. Of course, you’ll need to keep all aspects of the letter formal and professional, but treat the tenant like a person rather than a number on a spreadsheet.
At the end of the rent increase letter, you’ll need to leave a space for the tenant’s signature as well as the date of signing. Additionally, leave room for your name and signature as well. The notice can serve as both an alert for your tenant and as a legal record. Don’t forget to list any essential contact information as well. You must make it as easy as possible for the tenant to contact you if there are questions about the rent increase.
With these tips in mind, the actual formatting of the rent increase notice is fairly straightforward. The most difficult aspect of writing a rent increase notice is ensuring that the details comply with the law and best practices. Keeping your properties well-maintained and your tenants happy can be a delicate balancing act, but dealing with a rent increase is a necessary aspect of the job.
Regardless of your reasons for increasing the rent, there are certain legal requirements you must meet before you levy new fees on your tenants. Tenants are going to be unhappy with a rent increase regardless of what you do, so ensuring that you’re legally compliant is the best way to avoid any unnecessary hardship.
When you raise the rent, you typically can’t do it immediately. Under most lease agreements, a rent increase is not allowed during the leasing term. The tenant agreed to the term for a specific price, so that rent amount is valid until the lease expires. Once tenants reach the point where they must renew a lease, however, it is legal to increase the rent as part of the new agreement.
A written notice is required well in advance of a rent increase, regardless of whether the lease allows for it during its term. Having the details in writing is essential. You can deliver a rent increase notice by personally handing it to tenants or by mailing it to them. Sending an email to a certified address is generally a safe option as well, just to ensure there are records. Remember, merely telling tenants verbally will not be good enough to hold up in court.
One of the more complicated legal requirements is that the amount of the rent increase has to be reasonable. This is largely determined by the local rental market, so there’s no set definition for what’s reasonable that applies to every situation. Keep in mind that rent-controlled properties have many additional rules regarding any kind of increase.
Raising the rent is never easy on your tenants, but there are certain strategies you can employ to make the process more agreeable to them. Fortunately, most tenants expect some slight increases in rent, so the basic notion of raising the rent isn’t going to drive people away on its own in most cases.
Because most tenants expect that the rent will increase at the end of their lease term, it’s a great opportunity to propose a slight increase. Keep in mind that a slight increase would be something around $20 to $50 per month. An increase of $200 or more a month could drive tenants away. Generally, don’t increase rent more than about 3% to 5% per year.
When increasing the rent, make sure you send a rent increase notice no less than 60 days in advance. This will not only give the tenant a fair amount of time to adjust, but it also gives you more time to discover how they’re going to react. You can also use the notice to try to encourage a lease renewal, in spite of the increased rent, by thanking them for being a great tenant. Remember, losing a good tenant can be far more costly than a smaller rent increase.
In most cases, you’re not legally obligated to explain why you’re increasing the rent, though it may be a good strategy to offer an explanation in your rent increase notice. Tenants are generally more understanding when you offer an explanation, especially if it includes the fact that you’re trying to keep the increase as low as possible.
Finally, you need to be open to negotiation. Many of the best tenants are well aware of their value, so they’re likely to refuse your first offer. Be open to reducing the increase for good tenants, because losing them would hurt your bottom line far more. Additionally, it’s important to consider the cost of an eviction. If a tenant isn’t particularly favorable, you can use a rent increase to discourage a lease renewal.
When you keep these tips in mind, you can write a rent increase notice that will help you cover increased expenses and retain great tenants. Losing tenants is an inevitable part of renting properties, however, so if you have listings available, you need to find the best candidates to fill the space. Zumper is the best place to list your rentals, screen applicants, and find the quality tenants you deserve.
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