Rent Increase Notice 

As the owner of a rental business, determining the amount that you charge your tenants for rent is one of the most consequential decisions you will make. As it is sure to be the largest source of your income, rent increases will boost your overall revenue, although it’s always important to be conscious of market rates to keep your properties competitive. 

It’s also important to consider the obligation you have as a landlord to provide your tenants with a rent increase notice. Not only does providing advanced notice of rent increases give your tenants time to prepare, but it’s also regulated by law. 

What is a Rent Increase Notice? 

A rent increase notice is a letter sent by a landlord to a tenant giving them notice of a future increase in their rent, usually upon the renewal of their lease. Because rent was agreed upon in an initial lease agreement with a tenant, any attempt to increase rent before the renewal of a lease would violate those terms (unless the lease explicitly allows for mid-term rent increases and local law allows it). Each state has different laws regarding how long before the potential renewal of a lease a landlord must notify their tenants about a rent increase.  

Several states have more granular rent control laws that regulate when and by how much rent can be increased. In California, for instance, if the rent increase is at or below 10%, the landlord must provide written notice 30 days before the increase takes effect. If the increase is above 10%, the landlord must provide notice 90 days before the increase can take effect (Civ. Code § 827). It’s critical to pay close attention to the laws in your state and what they say about how much notice for rent increase is required. 

When is a Rent Increase Letter Used? 

While the exact reasons a landlord may raise the rent may vary, rent increases are generally responses to increasing operating expenses or cost of living in general. For instance, if a landlord’s property taxes, HOA fees, or repair costs increase, a rent increase is likely to follow so that the landlord can continue to cover those costs. 

It is always important to ensure that an increase in rent is justified so that you do not lose tenants. A rent increase that is too sharp or sudden may drive tenants to find cheaper rent with your local competitors. For this reason, another common reason to raise the rent is to invest in and improve your properties. If an increase in rent is partially justified by a promise of new amenities or renovations, you’ll be less likely to repel existing or prospective tenants.  

Who is Involved in a Rent Increase Notice? 

This letter only involves a landlord and the tenant that they are notifying. Since the lease agreement denoting the initial rent amount is a legal document between these two parties, a rent increase only involves them. The issuing of this letter indicates the landlord’s consent to these terms, and a tenant’s renewal of their lease would indicate their consent to the terms provided they had proper legal notice of the increase. 

What is Included in a Rent Increase Notice? 

A rent increase notice or letter can be very simple. At minimum, it should include the following: 

• The date the notice was sent by the landlord or property manager 
• The property address 
• The tenant to whom the notice is addressed 
• A statement of the landlord’s intention to raise rent  
• The new monthly rent amount 
• The date the rent increase will take effect (usually the first day of the new lease term upon renewal) 
• The landlord’s name and signature

Of course, the letter should be as polite and professional as possible given that a rent hike is generally bad news for a tenant. The landlord should also include the tenant’s rent in the new lease agreement upon lease renewal. 

For help crafting your own letter with the above components, you can download Innago’s sample rent increase notice at the top of this page. 

Rent Increase FAQs 

What are the legal limits on rent increases?

If your state or municipality has rent control laws, rent increases may be restricted. For instance, California has a state-wide rent control law called the California Tenant Protection Act as well as local ordinances that restrict how much landlords can increase rent. Be sure to do sufficient research on potential rent control laws in your city and state before raising rent. 

How often can I increase rent?

This also depends on your state/local laws. Typically, landlords at least consider raising the rent once per year, but they may be restricted from doing so more often depending on the lease duration and laws in effect. 

How do I determine the increased price?

When writing a notice of rent increase, you will need to include the new amount. There are several ways to determine how much the increase should be. For instance, if you are increasing rent to boost revenue, it may be helpful to perform a rental property profit/loss analysis to determine how large of an increase is needed to reach your financial goals or achieve positive cash flow. 

You can also determine the new amount by evaluating your rental market to ensure you’re staying competitive. This may include talking with other landlords in your area, browsing property listings online, or even consulting a real estate agent. A real estate agent can help you perform a comparative market analysis, which looks at comparables or “comps” in the area to determine a healthy amount that improves your income without costing you viability in the market.  

If raising your rent amount is meant to fund amenities or renovation, analyzing your local market can also provide insight into the kind of investments that are paying off and attracting tenants. Remember that while you want to stand out in your market, investing in real estate is also about making realistic decisions while minimizing large risks. You don’t want to risk your investments on an unfounded decision.  

Conclusion 

Using a rent increase notice template can help ensure you’re communicating with your tenants within legal guidelines and avoiding any confusion or disputes in the future. Increasing rent for your properties is a serious decision. Innago’s rent increase notice template, downloadable above, will help make this process as smooth and seamless as possible. 

 

Innago does not provide legal advice. This article is for educational purposes only and may not include the most up-to-date information. We recommend you consult with professional counsel if you have legal questions regarding your compliance with relevant laws.