How To Increase Rent Legally As A Landlord
Everything is getting more expensive. Take a look at the housing landscape in the US. For the past few years, interest rates have remained at around 7%, making mortgages more expensive for buyers.
As a landlord, the cost of owning a home may be eating away at your finances. Data shows that 9 in 10 homeowners in the US say that the actual cost of owning a home is higher than expected.
Therefore, you may want to increase the rent charged to your tenants to offset these costs. However, increasing rent is subject to various local, state, and federal regulations, such as the Tenant Protection Act (AB1482). Read this blog to understand how to increase rent legally.
Understanding The Legal Landscape
A few years ago, especially before the COVID-19 pandemic, the process through which landlords in California could increase rent was relatively straightforward. However, the situation has changed thanks to various measures enacted during the pandemic when the government flexed its emergency powers by preventing tenants from increasing rent prices.
Today, there are several nuances you should keep in mind if you’re looking to increase your rental prices. We have outlined them below:
Read Your Lease Agreement
Your lease is your guiding torch in all matters relating to your rental property. Generally, landlords are barred from increasing rental prices during the lease term unless such an arrangement is explicitly captured in the lease.
Therefore, your lease will let you know whether you can increase your rent. That’s why it’s important to design a lease agreement that encapsulates such situations. “A flexible lease agreement will allow you to increase your rental terms,” says attorney Michael A. Hackard of Hackard Law.
For example, you may opt for a short-term or a month-by-month lease agreement in place of a yearly lease agreement. This will allow you to increase the terms of your lease according to the current economic environment and prevent financial losses.
However, you must be aware that your tenant can challenge your increase in court, especially if they believe your motive is a retaliation to their actions. Maybe they filed a complaint against you or reported something to the authorities. Whatever the case, a rent increase within six months after a complaint was lodged would be considered retaliatory.
Understand California State Laws
California generally restricts 12-month rent increases to the following:
- 10% of the total rent amount, or
- 5% plus change in cost of living, whichever is less.
The California Department of Industrialization can provide information to prove a changing economic environment, validating a rental increase. In addition to state laws, local municipal laws may further limit the rate of annual rent increase. Be sure to review these laws before pushing the notices.
Further, note that certain leases have specific terms on the rate of increase with every renewal. The lease rates are often superior to the caps described above and should be prioritized in case of conflict.
Notices and Timelines for Tenants
As a tenant, you have a right to ample notice before a rent increase. The notice should be formal and written. Your landlord should not text or call you in lieu of a notice. The notice should be delivered in a way that you will receive it. This can be through your mailbox, knocking on your door and handing it over, or leaving the notice with a family member.
Remember that the notice period should also be sufficient. If the rent increase is lower than 10%, a 30-day notice is adequate. However, you will need a 90-day notice if the increase is more than 10%.
Similar to the limits, these notices do not apply where a lease is in place. Lease documents have clauses dictating the allowances for rent increases. In most cases, an increase will only happen during a renewal or after the lapse of a lease term. Therefore, it is implausible that you will receive a notice for a rent increase in the middle of your lease.
Also Read: Reasons Why You Shouldn’t Handle a Personal Injury Case Alone
When to Consult a Lawyer
You should consult a property attorney if your landlord is seeking action on a notice that was not formally written. Further, if the notice was not delivered on time, you’re within your rights to pursue a cause of action.
