Rent increases are a common occurrence during anyone’s tenancy in a rental unit. Even in some areas that don’t have rent control laws, there is no limit to the increase that a landlord can make on rent.
With that said, landlords aren’t allowed to raise rent as they wish. Most states have rent control laws and regulations that guide the amount, the timing, and the communication that a landlord follows to effect rent increase.
For instance, the landlord isn’t allowed to have discriminations in their rent increase systems. Here, we look at when your landlord is allowed to implement a rent increase.
When Can Your Landlord Increase Rent?
Except in places with rent control laws, your property manager’s legal right to increase your rent depends mainly on whether you’re a month-to-month tenant or have a lease rental agreement.
For instance, if you have signed a lease agreement, the landlord can’t raise the rent until the lease expires. However, they can only raise the rent if you agree to it or if the lease provides for it.
If you’re under a month-to-month rental agreement, your landlord can raise the rent by providing proper rent increase notice. In most cases, the notice should be given at least 30 days before the increase.
As per requirements, the rent increase notice should be put in writing. Verbal notices aren’t allowed as proper notice by rent control law. However, there are cases where certified mail can be used.
Effect of Rent Raise on Security Deposit
In most cases, a rent increase will trigger an increase in a security deposit.
Many states, including Michigan, limit what a property manager or landlord charges for the security deposit. The deposit is capped as a multiple of your monthly rent. For instance, the maximum deposit might be twice your monthly rent, depending on the state of course.
This, therefore, means that if rent increases legally, then the security deposit will also increase legally. For instance, if your deposit is capped at twice the monthly rental amount and the rent increases from $1,000 to $1,100, then expect the deposit limit to increase from $2,000 to $2,200.
Responding to an Illegal Rent Increase
You might be wondering, what action should you take if your landlord fails to give you a proper written notice for a rent raise?
If you have a month-to-month agreement, it shouldn’t be a big deal. It would be better if you agreed to the increase rather than insisting on fighting for your right. In such a case, all the landlord has to do is serve you with a 30–day notice.
The landlord must offer you a rent increase in writing to prevent the amount from growing mysteriously.
If not provided, ask the landlord to submit a letter of understanding confirming the new terms, or a new lease agreement confirming the new arrangements.
The situation, however, is different if you have a lease agreement. A lease protects you from any rental increases. Your landlord, in this case, can only raise the rent once your current lease expires.
Rent Increases as Discrimination or Retaliation
Landlords aren’t allowed to implement a rent increase in a discriminatory manner. For instance, they can’t have a rent hike for people from certain religions, races, or families with children.
The landlord or property manager isn’t allowed to use a rent raise in retaliation against any tenant for exercising their legal right. For example, if you make a genuine complaint to any public agency about poor conditions in your rent controlled apartment, the landlord can’t punish you by raising rent.
Talking the Property Manager Out of a Rent Increase
There is no legal action that you can take against a legal rent increase that isn’t considered retaliatory or discriminatory and doesn’t violate a rental control regulation.
The property manager can adjust the rent as much as the real estate market bears. However, this doesn’t mean you can’t appeal to the property manager’s business sense.
Even though renting is a business, like any other, with the landlord aiming to make profits, smart landlords understand that setting the monthly rent high isn’t the only way to make good business.
Solvent and long-term tenants are the best for landlords since they offer low maintenance and little to no turnover. In most situations, the landlord doesn’t have to coddle, sue, or evict them either.
Suppose you’re a good tenant and can convince the property manager that any rent hike will force you to leave. In that case, they might consider abandoning the increase or implementing a moderate increase instead. You’ll even gain more leverage with the landlord or property manager if you can prove to them that many other stable tenants are upset by the increase in rent and are considering moving.
If a rent hike affects the other tenants in your building, you may want to consider working together to present your grievances to the landlord, as a team. Most landlords understand that it’s difficult to get long-term tenants, even in a tight real estate market.
Reasons Why Landlords Raise Rent
Even though most landlords don’t find raising their tenant’s rent fun, it’s sometimes unavoidable, especially when things get tough or the markets change. However, the landlords need to ensure that the reasons for raising rent are genuine.
Below are reasons why landlords raise rent:
Keeping Up with the Market
One main reason why most landlords raise rent is to keep up with their local real estate market.
According to studies, the rental market in the United States keeps tightening, thus leading to a rise in demand. The rental prices will, therefore, rise automatically.
The rent index in the U.S. has always been on the increase. On the other hand, the vacancy rate has always been reducing. These two factors show that a landlord who seeks to implement a rent increase will always be in good company.
A landlord can use a rent comparison tool to determine whether their rental rates correspond to the local rates.
As the neighborhood improves and changes, it is likely that your rent will also increase.
When new services and businesses come to a certain location, the community can instantly become more attractive. It’s classification may change from being acceptable to desirable.
The value of a property will also increase with an enhancement to the neighborhood. In most cases like this, there is a high chance that rental prices will reflect this.
Circumstances that landlords consider include:
- An upgrade in public transportation
- Implementation of new services, including post offices and libraries
- New businesses, including restaurants, coffee shops, and grocery stores
If new companies open in a certain location, there will be an increase in job opportunities. This will likely translate into increased income and reduced unemployment. These are factors that help to improve the house values and lead to increased rent.
There will be more people who want to settle closer to their workplace, therefore a landlord, in this situation, might be justified to implement a rent hike.
Improvement in the Local Economy
As the economy keeps making a slow, but steady, economic recovery, the real estate industry is experiencing growth. Consequently, there is an increase in house prices.
Thus, increasing the house rent to match the increase in housing prices makes economic sense for landlords.
When a landlord makes improvements on their house, increasing rent to match the added value becomes justified.
When your landlord is replacing the tiles or carpet, re-doing the bathroom or kitchen, landscaping the exterior, or installing a new HVAC unit, these kinds of changes, which improves the overall house appeal, costs money.
Landlords can only make up for the costs by increasing the rental rates.
Landlords also experience an increase in tax following the state or federal government’s change in tax laws.
If there is an increase in taxes, for property or income taxes, the landlord might be forced to balance the losses by increasing rent.
How Landlords Can Raise Rent without Losing Tenants
Check Local Laws
Before a landlord raise of the rent, when renewing a lease, they should understand the local laws.
The state and local laws vary when it comes to raising the rent. For instance, some cities cap the rent rise below a certain percentage.
Every landlord who doesn’t understand rent control laws should seek legal advice from competent attorneys. This is possible by using a lawyer referral service or attorney listings.
There are several paid attorney advertising listings online where you can easily access their contact information. Choose attorneys based on their reputation and experience.
Making Rent Increase a Lease Aspect
Most tenants who live in rent controlled apartments, with increased rent, expect rates to be changing at least once a year. However, the landlord should still make the potential increase known by including everything in the original lease.
The original lease must contain information relating to any potential increase, including an annual percentage increase.
Making Fair Rent Increases
The landlord should figure out the amount they can increase on their rent. With that said, the amount should depend on the current market value of comparable units.
Therefore, landlords will have to do research and come up with a list of the rental prices of related units. They can then base their rental increase on those prices.
Before a landlord does a rent increase, they should consider the vacancy rate of their community. Typically a normal rent raise is between 3–5%.
If a landlord makes significant upgrades to their rental unit, they’ll have a good reason to increase rent without their tenants complaining. However, neglecting repairs puts landlords at war with tenants, especially when a rent raise is then implemented.
Landlords who want to increase rent should give tenants good reasons to do so.
Give Proper Notice
Every landlord must notify their tenants in case of any rent increase. Notifying the tenant needs to be done 30–60 days before termination of the lease, depending on the state.
The aim of the landlord should be to increase rent without damaging their relationship with the tenants.
There are compromises that property managers should consider to implement outside of the lease to keep the tenants comfortable. These include lower-cost concessions, repainting the apartment, providing complimentary packing, and changing out older appliances, just to name a few.