Rent Increase Notice Letter

A rent increase notice is a written document that informs a tenant of the increase in the amount of periodic rent. State law requires that this notice is provided a certain number of days in advance of the first applicable payment period.

As a landlord, it is understandable that you may need to increase your tenants’ rent occasionally. While you don’t need to explain your reasons for increasing rent, by following a few of the guidelines provided in this article you may be able to reduce any anxiety caused by raising it while remaining compliant with the law. And, we get it, there are many genuine reasons to increase rent, such as a raise in:

• Taxes
• Insurance premiums
• Maintenance fees
• Homeowner association dues
• Cost-of-living

Landlords do not have the ability to increase a tenant’s rent whenever they feel like it (there are guidelines a landlord must follow to increase rent which helps protect tenants from unreasonable increases) however, if you decide that an increase in rent is in order, then you are required to follow specific landlord-tenant guidelines to administer the increase.

Legal Requirements for Rent Increases

Landlords must often follow explicit legal procedures when increasing a tenant’s rent. The following is a list of the most important federal and state requirements to follow:

Rent increases cannot occur during a fixed-term lease

If your tenant signed a fixed-term lease, you can’t legally raise their rent until the end of the fixed-term. The only exception to this is if you added a provision in your original lease contract allowing you to raise the rent during the fixed-term. However, this provision is not recommended as it negates the purpose of a fixed-term lease and is rarely admissible in court. Landlords can introduce a rent increase when a new fixed-term lease is created or after the original lease has ended and the tenant agrees to a lease extension under new terms.

If your tenant signed a month-to-month rental agreement, you can legally raise their rent after providing them with proper notice, which is usually 30 days but varies by state.

Landlords must provide written notice prior to the increase

If a landlord wants to increase a tenant’s rent, the landlord must send the tenant written notice. Your notice needs to be in writing (letter or email) since verbal agreements are not ordinarily permissible in court (if there is a dispute). Ideally, you will want to send the notice via certified mail which will provide you with a record that the tenant received it.

Landlords must provide sufficient written notice

State law usually requires landlords to provide their month-to-month tenants with either 30 or 60 days notice of an increase in rent. In some states, the amount of notice correlates with the percent of the rent increase. For example, in some states, if a landlord asks to increase the rent by 15 percent or more, then they are required to provide 60 days’ notice.

Rent increases must be reasonable

Rent increases must be considered reasonable and determined by the property’s local rental market. Increases may be used to cover rising real estate taxes, insurance premiums, HOA fees, and costs of maintaining the property. If your property is rent-controlled, you will need to follow specific rules as to how much and how often the rent can be increased.

Landlords may not retaliate by increasing rent

If a tenant thinks that their landlord has increased their rent as an act of retaliation or discrimination, they can take the landlord to court. Landlord retaliation is illegal in most states, while landlord discrimination can be considered a federal offense.

• An example of a landlord retaliation is when a landlord increased rent because a tenant complains to the authorities about a potential health code violation at the property.
• An example of landlord discrimination is when a landlord refuses to rent their property to members of a certain race.

Tenants have the right to decline

If a tenant does not agree to pay a reasonable increase in their rent, then they must move out of the property at the end of their term. If you have an exceptional tenant and you want them to renew their lease, you may want to waive the rent increase. A great tenant can be worth far more than a rent increase.

State and Local Laws on Rent Increases

As mentioned above, each state has its own unique laws that govern their landlords and tenants. Additionally, if you are a landlord offering rent-controlled housing, then your options to increase a tenant’s rent can be even more restricted.

Your state and local government may have any of the following written laws concerning raising a tenant’s rent:

• Rent-controlled housing
• Rent increase limits (percent of increase)
• Rent increase frequency (how often)
• Fixed-term lease and month-to-month rental agreement
• Landlord notice requirements

Under most circumstances, if it’s a fixed-term lease (standard, one-year lease), landlords are not permitted to increase their tenant’s rent until the end of the lease term. For month-to-month rental agreements, the landlord may be required to provide written notice of a rent increase and should only raise it when the lease expires.

As long as there are no municipal laws preventing the landlord from raising rent, the sole duty of the landlord is to provide their notice within the period of time required by their state. The following states have notice requirements for increasing a tenant’s rent:

Illegal Rent Increases

Landlords have specific responsibilities under federal, state, and local landlord-tenant law. When a landlord-tenant dispute occurs and the landlord increases rent in bad faith (in an effort to force the tenant to move out) it is likely against state law. There are several situations when rent cannot be increased:

• Retaliating against a tenant for:
  • Asking for repairs
  • Reporting a housing code violation or unsafe, unhealthy, or illegal living conditions to a building inspector, fire department, health inspector, or other agency
  • Joining or organizing a tenant union
  • Following self-help strategies allowed by their state and local law
• If the fixed-term lease has not expired and does not allow an increase
• Advanced notice was not properly given according to state and local laws
• Local laws on rent control or rent stabilization are violated
• Discriminating against the tenant’s race, religion, or sexual orientation

These laws have been written to protect tenants from various forms of landlord retaliation.

Know Your Local Rental Market Rates

In a majority of cases, the cost of managing a rental property does not dictate how much rent should be charged for it—the local rental market does. You wouldn’t get much interest from prospective renters if you charge significantly higher rental prices than similar nearby properties. By keeping your rental prices competitive to your area, you gain a much higher chance of having your property seen and rented. The best way to determine how much you should increase rent by is to look at similar properties in your area to see how much they are going for. There are two easy ways to do this:

Get rent comps. Use actual rent data when looking at prices—prices pulled from rental listings typically shows how much the property is projected to rent for, while actual rent data provide you with how much the property actually rented for.

Get listings comps. While these are not as accurate as rent data, it’s also worth looking at the rental listings in your area to see how much nearby landlords are projecting to rent their property for.

When looking at comparable rentals, you will want to look at nearby properties with a similar number of bedrooms/bathrooms, property type, square footage, neighborhood, and amenities to your property.

Regardless of how much you decide to increase your property’s rent, be sure that it falls within local rental market prices. Getting a new tenant can sometimes be difficult. By pricing your property reasonably, you can attract more renters and have a higher chance of renting your property. Tenants expect slight rent increases when its time to renew their lease of around $10-30 a month. A 3-5 percent rent increase per year is common, but if you surprise your tenant with a significant increase, you’ll likely get a negative response.

Composing a Rent Increase Notice

So, you checked with your state’s laws and you are legally allowed to increase your tenant’s rent and you know how much you want to increase it by. Now it’s time to write the rental increase notice. A rental increase notice is a written document provided by the landlord, informing tenants of his or her plan to raise the rent. These notices only apply to month-to-month rental agreements or expiring fixed-term leases. After the notice is issued, tenants may either agree with the increase or decline to continue their tenancy and vacate the property.

In the rent increase notice, you are required to provide the tenant with the revised rent amount and the date it becomes effective (typically, the day after the fixed-lease or month-to-month agreement ends). These notices serve two purposes—they inform the tenant of the rent increase while officially documenting the change.

It is understandable if a tenant is less than thrilled to receive a rent increase notice—so try to keep your notice polite and professional. Personal finances can be a sensitive subject and communicating the increase suitably may give your tenant a reason to stay. Tenants appreciate a landlord that is honest, professional, and personable, so don’t skip any pleasantries. While you want to keep your notice concise, consider writing a brief explanation as to why you’re increasing rent. The reasons could be anything from a new homeowners’ association fee to an increase in taxes. This level of transparency can make the increase more understandable to your tenant.

Your rent increase notice should include:

• Tenant(s) name
• Property address
• Landlord(s) name
• Landlord contact and address
• Date of notice receipt
• Date of rent increase (effective date)
• Rent increase amount
• Current rent amount

You will also want to allow space for the tenant to either agree or disagree with the rent increase amount and sign and date for your records.

Delivering a Rent Increase Notice

You can hand-deliver or mail your rent increase notice, however, if you mail it you will want to utilize certified mail with a return receipt. This will provide you with proof of notice—in case there is confusion in terms of the rent increase and the matter is taken to court.

For fixed-term leases, you can include a copy of the new lease with your rent increase notice. Highlight any changes (like the increase) that have been made to the lease and ask your tenant to review the new lease, and sign it if they agree with the changes.

Your tenant will make their decision of whether to agree and pay the increase in rent, make a counter-offer, or elect to move-out. If your tenant is uncertain about renewing their lease as a result of the rent increase, you can send them information on similar properties in the area to show that you have done your research and the rent increase is a fair amount.

The bottom line is if you decide to increase a tenant’s rent, make sure that you are following federal, state, and local requirements, providing advance notice while offering a fair market price for your area—this may also help you keep reliable renters as well.