Raising rent isn't uncommon in any state. Whether you do it to keep your profit levels or to pay unforeseen bills, increasing your monthly rental payment amount is something that most landlords have considered at least once.
Unfortunately, getting a new monthly rent isn't something appealing for most tenants, so these increases are often seen as a negative thing.
However, not all increases have to be bad. In fact, a new monthly rent can open the opportunity for future property enhancements that benefit both parties, for example.
Regardless of the reason why you may want to come up with a new monthly rent amount, you must know the right way to communicate that to your tenant.
The following page will teach you how to write a rent increase notice document in a positive and efficient way, ensuring that you don't have any further problems with your lease agreement or your tenant.
What Is a Rent Increase Letter?
As the name implies, a rent increase letter is a document you sent to your tenant, which outlines the details of a monthly rent increase.
In most cases, the landlord won't be able to raise rent until the end of the lease agreement term, especially in the case of yearly leases.
Now, a rent increase letter has two primary goals:
- Outline the reasons why the landlord is raising rent, the new amount, and other important details.
- Record that the landlord notified the tenant of such an increase with enough time.
The "problem" with creating a rent increase letter is that the law surrounding these documents will change depending on the state where you're renting the property.
Certain states place limits surrounding how many times you can raise rent and when you can do it.
How Much Notice Should You Give?
As mentioned before, you may not be able to raise rent until the lease expires; this applies regardless of the type of rental agreement you currently have.
In most cases, you will need to provide between 30 or 60 days of notice to your tenant, depending on the state and the type of lease.
Now, there are some special considerations you should keep in mind:
If you include a clause in your rental agreement that states you can increase rent before the lease ends, you will be able to do it as long as the tenant signs that document. Some tenants may be able to accept this condition if you promise upgrades to the unit.
The best you can do to be sure of your rent increase notice period is to check your local laws.
What Is the Maximum Rent Increase Allowed?
It depends on the state and whether it has rent control laws or not.
On average, landlords increase the rent from 3% to 5% every year, and they calculate these increases according to recent trends in their local rental market.
In some states like California, landlords may increase rent by over 10%, but in those cases, they may be required to send the rent increase letter much earlier.
Again, if you want to have more accurate information about rent increases in your area, we suggest you review your state's laws surrounding rent.
Factors That Can Justify Rent Increases
Technically, landlords can increase the rent for any reason, but if you want your tenant to be more willing to accept that increase, you must justify why you're doing it in the first place.
Here are all the reasons that may warrant a rent increase, which you can use in your increase letter:
Rising Inflation: It's no surprise that high inflation rates can lead you to lose some of the profit you've been gaining from your property. If this is the case, then it may be a valid reason to send a rent increase letter.
Higher Utility Bills and Maintenance: We cannot control the prices we pay for utility bills or maintenance jobs, so if your provider increases the price for any reason, then you may need to increase rent too if you want to keep good profit margins.
Rental Property Improvements: This is one of the best arguments you can use to increase rent. If you promise your tenant you'll make any property enhancements in the future, then they'll be more likely to accept the rent increase, as long as it's reasonable.
Increased Property Taxes: Finally, if you get higher property taxes, then you could increase rent reasonably to keep your profit margins the same.
Regardless of the argument you use in your rent increase letter, make sure you're not hiding anything from your tenant. They deserve to know why you're making the decision to increase rent and what benefits they'll get from that.
A rent increase process that doesn't benefit the tenant in any way increases the chances of them moving out to find another place.
Tenant Protection Measures for Rent Increases
Something you should note when drafting your new monthly rental payment guidelines is that most states offer protection for tenants surrounding rent increase letters.
Here are some factors you should always keep in mind before a rent increase:
- Landlords must always provide written notice before a rent increase. Oral notices aren't legally binding and won't work in court in case there's a dispute.
- Landlords can't increase the rent until the lease expires. The only exception applies when they included a clause in the agreement that allows them to raise the rent.
- The rent increase notice should be sent either 30 or 60 days before the lease expires. Moreover, the amount of notice may change depending on how much you're planning to increase.
- Every rent increase should be reasonable if the landlord doesn't want the tenant to move out. In states with rent control laws, the landlord cannot charge more than what's legally allowed.
- Landlords can't increase the rent as an act of retaliation or discrimination. If this happens, the tenant can take the case to court.
- Tenants have the legal right to decline a rent increase. If the rent increase is reasonable, then the tenant has to move out of the property. On the contrary, if it isn't, they may take the case to court.
How Can You Calculate a Monthly Rent Increase?
You can download a sample rent increase notice to make the process much easier. However, you still have the task of calculating the new rent price for your rental property.
First, you must evaluate whether increasing rent is legal or not in your state. If you can, then take a look at the following factors you can consider when calculating the new price:
You can run rent comps to do research on the local market and come up with a reasonable rent price. If your property is in a place with a higher demand for rental housing, then you can expect rent prices to be higher.
Make sure you're always up to date with the latest market trends.
Remember that you can only increase rent once the lease ends. If you have a monthly lease, for example, you should send notice one or two months before the expiration date.
Amount of Money
In any case, the new price for your rent should be based on what the local rental market says. Otherwise, your tenant may find the increase unreasonable, and you may either lose the tenant or face legal consequences.
Amount of Notice
Make sure to research your local laws to determine the appropriate amount of notice for your current rent increase.
How Do You Write a Rent Increase Notice Note?
Drafting a rent increase letter is fairly easy, and it's even easier if you download a template.
When it comes to drafting one of these notes, less is better. You don't have to overwhelm your tenant with unnecessary information. The letters should concise and to the point.
Here's what you should include at a minimum level:
- The tenant's name and property address
- Amount of the increase
- When the increase will go into effect
Additionally, you can include:
- The expiration date of the lease
- How much time the tenant has to accept or reject the increase
- How much time the tenant has to draft a non-renewal notice in case they don't agree to a reasonable increase
- Why you're raising the rent
Some tenants believe that landlords increase the rent to "punish" their tenants. If you want to avoid this, try to use neutral and polite language, ask your tenants to reply to the letter, and offer them a way to contact you if they want to discuss the details further.
Sending the Rent Increase Notice to Your Tenant
First, you should have the letter reviewed by an attorney so that you ensure you're not breaking the law in any way. Now, you may choose a delivery method for the letter depending on your state's regulations.
Some common delivery channels include:
- In-person delivery
- Certified mail (best option)
Do Rent Increases Affect the Security Deposit?
In some cases, an increase can affect the deposit. Some states require the deposit to be linked to the amount of rent (i.e., two times the monthly rent).
If you increase rent in that scenario, then your deposit should go up too. However, it's not mandatory to increase the deposit, and not doing it is actually a good incentive to get the tenant to agree.
We've covered everything you must know about rent increase notice letters, and we hope this page has helped you understand them more.
Make sure to check DoorLoop and its forms page to download any other rental forms you may need for free. These forms will make your rental life much easier!