As increased demand for apartments outpaces increases in supply, multifamily rental rates are increasing. Landlords should keep pace with the market. Landlords also need to increase rent regularly so that their revenue is adequate to cover increased costs.
Yet no landlord wants an increase to cause an exodus of tenants. How a landlord communicates a rent increase can be almost as important as the amount of the increase in determining tenant reaction.
Before increasing rental rates, the landlord should read the tenant’s lease, even if it is the end of the lease term. Some leases restrict when and how much a landlord can increase rent. The lease also may include a procedure for increasing rent at the end of the lease term. Or, the lease may allow the tenant to renew the lease at a pre-determined rental rate. Other times, the tenant may have to sign a new lease in order for the landlord to increase the rent.
If the lease term is not ending, the landlord should check to see if the lease has built-in rent increases. If the lease does not specify that it allows rent increases in the middle of the lease term, then the landlord likely will be unable to increase rent.
Some landlords are subject to government regulation on rental rates. If the landlord receives a government subsidy for the tenant, there may be restrictions on how much the landlord can charge that tenant. Other times, the current or previous owner of the real estate may have received government financing or other incentives that limits how much can be charged tenants over an extended period of time.
Some cities, such as New York City and Washington, D.C. have rent control or stabilization laws. Where applicable, these laws will limit rent increases. Rent control laws can be complex. Landlords subject to these laws should check with an experienced attorney or the agency that regulations the program to determine limitations applicable to their properties.
The landlord should send a rent increase notice at least one month before the increase takes effect. The notice should be clearly identified so there is no question that the information was clearly communicated to the tenant. A title “Notice of Rent Increase” is an example of acceptable language.
Although the form of the notice can be generic, the letter should be customized for each rental unit. The notice should be addressed to all tenants listed on the lease and include, at a minimum, the following information:
If the landlord knows that the tenant is not a fluent English reader, the landlord should consider providing the letter in both English and the tenant’s native language. Even where this is not legally required, it can prevent misunderstandings and promote good tenant relations.
The landlord should keep a copy of the written notice, along with notes of when and how it was delivered to the tenant.
When increasing rents, landlords also should be aware of fair housing laws. Increases should not result in tenants of a certain race, national origin, gender, age, or disability or familial status paying more than other similarly situated tenants. If tenants in protected classes are charged higher rental rates, the landlord could be violating fair housing laws even if no discrimination was intended.
Landlords also should also be cautious when increasing rent for tenants who have made housing code or other complaints. Making a housing code complaint does not insulate a tenant from increases applied consistently to tenants at a property. However, an unexpected increase after a tenant makes a complaint could look like unlawful retaliation.
All landlords should send a written notice of the rent increase, even the landlord has already spoken with the tenant about it. The written letter provides documentation of the communication between the landlord and tenant and can prevent disputes.
The landlord should send a notice even if the lease provides for an automatic rent increase. The tenant might forget about it if not reminded. By providing notice, the landlord can make it more likely the tenant pays the increased amount and avoid potential disputes with a tenant who forgets about the increase.
Finally, by engaging in clear communication with tenants, landlords can prevent misunderstandings and tenant complaints.