When can I raise the rent?
Landlords typically evaluate their Lease Agreements and the current local real estate market conditions before deciding whether and when to increase the rent. Even in a hot market, increasing rent too much may cause a loss of tenants and result in a higher turnover rate, prolonged vacancies, and a decline in your rental business. The result of charging too little may damage cash flow, leading to a suboptimal return on investment. Rental prices that are far below the market average may raise the suspicions of potential tenants. Good potential tenants may choose to avoid renting from you if your prices are too low.
Raising the rent up to market rate, or making smaller annual increases that do not exceed market rate, may cause less disruption to your business as tenants evaluate whether to accept the increase or move out. Tenants are less likely to leave if their options for a similar unit are priced similarly. Additionally, it is important to note that Lease Agreements as well as state and local laws may limit a landlord's ability to raise the rent.
Is it legal to raise the rent during a lease?
Lease Agreements specify how much a tenant will be required to pay in rent for a certain period of time. Before that time period expires, a landlord may not be able to raise the rent unless the Lease Agreement allows it. A lease may allow rent increases mid-lease for certain reasons, such as property improvements, additions to the provided amenities, or an increase in the number of tenants.
After the time period in a lease ends, however, a landlord can usually raise the rent. In most states, landlords are required to give tenants a written notice well in advance of the rent increase.
What is the process for raising the rent?
Lease Agreements, or state and local laws, often specify a maximum dollar or percentage increase allowed. Landlords may wish to explain their rental rate increase policies to tenants before they move in to avoid surprises later. After all, not every tenant reads their lease.
Landlords have a legal obligation to notify a tenant of a proposed rent increase. State and local laws typically require landlords to provide at least 30- to 60-days notice, or more. If you are unsure of your state or local requirements, ask a lawyer. To avoid confusion, landlords may want to ask tenants to sign a Lease Amendment that reflects the rent increase and the date it will take effect.
Before raising a tenant's rent, here are some key guidelines to keep in mind to avoid confusion and legal problems:
- Rent increases should be communicated to tenants in writing, well in advance of the increase.
- Explain how the increased rent is competitive in the local market.
- If allowed by state and local laws, maintain consistent rent increases of 3%, or less, per year.
- Follow the state and local laws for raising rent and sending proper advance notice.
- Advise the tenant of a specific move-out date if they choose not to pay the higher rent.
Are there legal limits to how much the rent can be raised?
Landlords are faced with mortgages, insurance, maintenance costs, repairs, utilities, and taxes on a regular basis. These expenses can add up quickly, leaving landlords to wonder how much they can raise rents without running afoul of the law.
The laws governing rental rate increases differ from state to state. Many states specify how much written notice a landlord must provide before increasing the rent. Local rent control or rent stabilization ordinances may also restrict rent increases in certain areas. Here are some examples of laws regarding increasing the rent in five major states:
California law requires that a landlord give tenants at least 30 days written notice if the rent increase does not exceed 10%. A landlord must announce a rent increase of more than 10% at least 90 days in advance.
Rent control laws remain in effect in New York City. The local government can even limit rent increases to certain amounts through rent-stabilization laws. In contrast, if a tenant is operating on a month-to-month lease and the apartment is not rent-controlled, the owner can raise the rent. A landlord must notify tenants if they plan to raise the rent by more than 5% or not renew the lease. Unless otherwise agreed, the landlord may terminate the tenancy when a lease expires by giving advance notice.
Rent increases vary by type of lease, according to Texas law. The law requires that a tenant with a month-to-month lease be provided at least 30 days prior notice of any proposed changes, including a rent increase. A tenant is presumed to accept the new rent if they do not terminate the lease.
Colorado does not have rent control laws, so landlords can raise the rent at their discretion. However, a landlord must provide tenants with proper written notice at least 10 days before ending a month-to-month lease.
Rent increases are not capped in Florida. They are solely at the landlord's discretion. Florida law does not say how much notice to the tenant is required, if any.
What can landlords do if tenants do not pay the increased rent?
If a tenant is not paying the increased rent amount, you may want to talk to them before taking any formal legal action. If it is a simple mistake, your tenant may be willing and able to pay the unpaid amounts. If the tenant refuses to communicate, or otherwise indicates they are unwilling to pay the increased amount, you may want to consider evicting the tenant.
Evictions can be rather complicated and simple mistakes can lead to delays and increased costs. Before initiating eviction proceedings against a tenant, you may want to prepare an Eviction Process Worksheet. This can help you evaluate whether a tenant may be evicted, and organize the information you may need during the legal process. The eviction process varies from state to state, and may be subject to specific city or county laws.
Evictions are time-consuming, costly, and stressful for landlords and tenants alike. It is generally more efficient and cost-effective to resolve the situation with open communication before taking legal action. Unfortunately, if a tenant does not pay their rent, a landlord may be forced to send an Eviction Notice.
If you have legal questions about raising the rent, reach out to a Rocket Lawyer On Call® attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.