The Legalities of Raising Rent: How and When You Can Do It

When you own a rental property, your livelihood depends on all aspects of running it legally and successfully. One of those aspects is the ability to raise rent deemed necessary to turn a profit. However, can you raise rent at will? When are you legally allowed to do so? Read on to find out the legalities of raising rent on your rental property.

Do You Need a Reason to Raise Rent?

Generally, there’s no law that requires you to have a reason to raise rent except if you live in an area with rent control; in this case, the rent control board is likely to want to know why you are raising rent. Even without rent control, though, you may need to explain why you’re increasing rent if a tenant contests or questions the increase and it goes to court. It’s good to document your reasons for raising rent so, in case of an argument or dispute, that you have evidence that your increase was legitimate.

Reasons You are Legally Allowed to Increase Rent

There are a few situations in which you can legally raise rent.

When the Lease is Ending

This is the most common reason rental increases occur. When the tenant’s lease is ending, you are legally allowed to raise rent; however, you must inform the tenant before the lease ends. You are not allowed to increase rent when the tenant has an active lease without their consent.

When Property Taxes, Utilities or Insurance Increase

If you have an all inclusive lease, you may be allowed to raise rent if you have to pay more for property taxes, utilities or insurance. Increase is dictated by the state, so research your state’s laws to make sure you’re in compliance.

When Tenant Receives a Benefit

If your tenant is receiving a benefit such as receiving a new tenant that is directly paying you, you can raise rent on the tenant who is benefitting from the increase in income.

How Much Can I Increase Rent?

Both the federal and state governments determine how much you can raise rent. States that have rent control laws in place, like California and New York, require a Board of Review to set a cap for how much you can increase rent each year, which is usually around 3-5 percent. In states that do not have there rent control laws, the tenant must pay whatever the landlord or market dictates.

However, increasing rent must always comply with the federal fair housing laws; you cannot charge different rental rates to different tenants based on race, color, national origin, religion, sex, familial status, or disability, as stated by HUD.

What is Normal to Increase Rent For?

In most states, you are allowed to increase rent for any reason as long as applicable in the state. The most common – and accepted – reason to increase rent is to pay for maintenance costs that are not covered by tenant which could include, but are not limited to, a roof replacement, painting, or a new HVAC unit installation.

You can also adjust rent prices for amenities such as a new tenant or additional living space for the same tenant. But keep in mind, rent increases are treated differently when discussing amenities that are included on your lease agreement (like a garage, pool, washer/dryer or other features) between the landlord and the tenant. These amenities must be included on the lease agreement prior to increasing rent for them.

The Process For Raising Rent

When you’re ready to raise rent, there is a process you must go through.

Step 1: Provide Tenant With Notice

Before you raise rent, you must provide written notice to the tenant. You must adhere to simple regulations regarding the notice:

• Notices should be sent by regular mail.
• Include the amount of rent increase.
• Specify the date the increase will start.
• State the reasons for the rent increase.

Step 2: Accept New or Existing Tenants

If you’re in a state that allows renters to choose whether or not to accept the rent increase, then you must change your rules in the tenant lease agreement. You must allow the tenant to choose to stay at their current rent rate or accept the new rate.

Step 3: Get Rent Increase in Writing

Before a tenant can move in or stay at the new rent rate, you must have their signature in writing. This document should also include the day the current rent rate or the increase will start and any stipulations or reasons for the rent increase.

The Legalities of Raising Rent: How and When You Can Do It

When it comes to legally raising rent, there are rules and regulations that you must abide by. Before you raise rent, make sure you know the legalities in your area as they vary by state. Generally, you’re only allowed to increase rent when a lease ends, when property taxes, utilities or insurance increase, and when a tenant is receiving a benefit. How much you can increase rent must be adhered to the rent control laws set forth by your state, if there are any in place; otherwise, you must stay within the federal fair housing laws. When you are ready to increase rent, you must always provide written notice to your tenant and get their signature in writing.

Once you know the legalities of raising rent and the process you must go through, you can move forward in protecting your investment as the owner of a rental property.

Conclusion

Increasing rent on a rental property can seem like a daunting process. But with a little bit of knowledge about the process and the legalities of increasing rent, you can move forward in protecting your investment. By understanding what reasons you are legally allowed to increase rent, how much you can increase it, and the process for doing so, you can successfully raise rent on your rental property with ease.

How much can I increase rent without creating legal issues?

The amount that you can increase the rent without creating legal issues is largely dependent on the laws in your jurisdiction. You should always consult a lawyer or the local housing authority to determine the maximum amount you can raise the rent without legally overcharging your tenants.

What are the landlord-tenant laws in my state regarding rent increases?

The specific landlord-tenant laws governing rent increases vary by state. Some states, for example, require landlords to give tenants notice of a proposed rent increase before it takes effect. Other states allow landlords to increase the rent at any time, provided they give a specific amount of notice prior to the increase. As such, it is important to review your state’s landlord-tenant laws to determine the rules for rent increases in your jurisdiction.

What is the maximum amount my landlord can raise my rent?

The amount your landlord can raise your rent is typically regulated by state or local laws and varies greatly from one location to the next. In some areas, rent control laws apply and limit the amount landlords can raise rent annually. In other areas, there may be no limit as to how much the landlord can increase rent from one period to the next. You should contact your local rent board or housing authority to get specific information about landlord/tenant laws in your area.