As a landlord, it’s important to understand the laws and regulations around raising the rent to stay compliant and maintain a positive relationship with your tenants. While rent increases can help cover rising operating costs and boost revenue, it’s crucial to approach them fairly and transparently.
Let’s explore the guidelines and considerations for raising rent in the United States.
When Can a Landlord Raise Rent?
Landlords can legally raise the rent in most states by providing proper notice to tenants. State law typically requires landlords to provide tenants with a notice of rent increase 30-60 days before the increase takes effect. In some cases, the lease agreement may specify the amount of notice required.
When Can a Landlord Not Raise Rent?
There are a few situations where landlords may not be able to raise the rent. For example, if a tenant is under a fixed-term lease agreement, the landlord cannot increase the rent until the lease term has expired. Additionally, it’s illegal to raise the rent as a form of retaliation against a tenant who has exercised their legal rights, such as filing a complaint about unsafe living conditions.
Other scenarious include:
- The new rental price would be higher than the limit specified by the rent control regulations in your state.
- The lease contract states that the rent price will not increase if you renew it for another term.
- Your property has rent-controlled status.
- The rent increase violates the Fair Housing Act since it is perceived as discriminatory.
How Much Can Rent Be Raised?
The state regulates the amount that landlords can raise the rent. Additionally, some cities have additional regulations on top of state law. In general, rent increases cannot be discriminatory or unreasonable. For example, if the local market only supports a 2% increase in rent, a landlord cannot increase rent by 10%.
How to Determine New Rent Price for Your Rental
When considering a rent increase, landlords should consider a few factors.
Review Your Operating Expenses
Landlords should review their operating expenses, such as property taxes, maintenance costs, and insurance premiums, to determine how much additional revenue is needed to cover these expenses. Other expenses include Homeowners Association (HOA) fees, depreciation, utilities, landlord software fees, etc.
Consider the Current Condition of the Rental Market
The current condition of the local rental market should also be taken into account. Being aware of current adjustments to rent pricing and how they affect tenants is crucial because the rental market is undergoing rapid change. If demand is high and supply is low, landlords may be able to increase rent more than they could in a soft market.
Research Local Rental Comps
Landlords should research the rental prices of comparable properties in the area. To manually browse rental listings, visit websites that help people find apartments, such as Padleads. You can also find this in popular websites they are syndicated to. This will give them an idea of how much they can realistically charge without pricing themselves out of the market.
How to Communicate Rent Increases to Tenants
When communicating rent increases to tenants, it’s important to be transparent and provide proper notice. In most cases, landlords are required to provide written notice of the rent increase within a certain period set by the law. This notice should include the new rental amount, the effective date of the increase, and the reason for the increase.
What to Do If Tenant Negotiates New Rent Price
In some cases, a tenant may attempt to negotiate the new rent price. It’s up to the landlord to determine whether or not they are willing to negotiate. If a landlord decides to negotiate, they should do so fairly and consistently, and they should make sure that the new rental amount is still reasonable and in compliance with state and local regulations.
If you will not negotiate, the tenants must let you know if they agree to the higher rent price or if they want to leave when the contract expires.
Raising rent can be a tricky subject for landlords and tenants alike. However, by staying up-to-date on local laws and regulations, taking a fair and transparent approach, and communicating clearly with tenants, landlords can successfully navigate rent increases and maintain positive relationships with their tenants.