Rent Increase Letter
How To Write a Rent Increase Notice
There are a lot of good reasons to raise the rent. In fact, training your longer term tenants to expect a yearly rental increase can be one of the best ways to guarantee an increase in the return on investment of your rental properties. Additionally, it serves as a good hedge against inflation.
Some Landlords feel bad or awkward about raising the rent, but remember, it’s just a cost of doing business.
Below, you’ll find tips on how to increase the rent without losing your tenants, as well as a free rental increase template for you to modify.
Tip #1: Make the rent increase part of the rental contract
In your initial rental contract, add language that, on renewal, mentions a rental increase. You can either mention a real number or use a percentage. Try not to overcharge, 3-5% is usually a good bet. Of course, if rents skyrocket in your market at the end of the lease, you’re not required to renew with that tenant.
Check with your local landlord association to make sure this is legal in your state.
Tip #2: Give Ample Notice, In Compliance with Local Laws
Let the tenant know way in advance that you’re going to raise the rent. If they don’t want to stay, then you’ll have time to properly market and rent out the unit, lowering your vacancy rates and keeping your cash flow going.
You can send the letter via email, or mail. It’s up to you if you want to explain why you want to raise the rent. Sometimes, mentioning an increase in your expenses (such as local taxes, heating, etc), may make the tenant more open to a rental increase.
If a new lease is required, make sure to send it to the tenant to get their signature and renewal.
Tip #3: Use This Sample Rental Notice as a guideline[Date] [Tenant’s Name] [Tenant’s Address] [City/State/Zip Code]
Re:Notice of Rent Increase
Dear [Tenant’s Name],
Your lease at the property listed above will expire on [Lease Expiration Date].
Effective [Rent Increase Date], the monthly rent for this property will increase to $____. This represents a change of $___ from your current rent, $____ per month.
If you wish to continue with your [lease agreement/month to month tenancy], you will be required to pay this new amount. The rest of your lease agreement shall remain the same, with all terms in force and effect. Should you not wish to renew your lease agreement with us, please provide us with notice as soon as possible, but note then the legally required date of [Last Day Notice Date].
Please contact me with any questions or concerns you have, at [contact information].
Tip #4: Know The Law about Rental Increases!
As always, the law has something to say about rental increases. If you are a landlord in an area with rent control or rent stabilization, then there are significant restrictions on your ability to raise rents.
Additionally, you cannot raise the rent in the middle of a fixed lease contract. If you rent to section 8 tenants or through another HUD or local agency program, there may be additional restrictions on rental increases.
For tenants who signed a lease, you cannot arbitrarily raise the rents until the period is up. If you placed a clause in your lease agreement to allow for rental increases within the term, note that many courts frown upon this and may invalidate your entire lease agreement.
For month to month tenants, you can raise rents as long as you provide proper notice. The notice period will vary by state. Your notice must be provided in writing. As with any important communication with a tenant, we strongly suggest registered mail at a minimum.
Additionally, you cannot raise the rent in a way that is discriminatory. Meaning, you can’t raise a rent due to race, religion, or something else you don’t particularly like about the tenant.
If a tenant has filed a complaint or exercised a legal right, raising the rent within a certain period may well be viewed as “retaliation” by the courts.
Tip #4: Know Your Local Market Rents!
You can’t charge whatever you want for a rental, because tenants will go elsewhere. Make sure to know your local rates. Keeping your rates within the market range will ensure that tenants stay, even when you raise the rents a bit.