Raising The Rent

By E-Renter Tenant Screening
Posted on July 21, 2006 under Landlord Tenant Lawsuits | icon: commentBe the First to Comment

As costs of maintaining properties rise over time, a landlord may not have any other option, but to raise the rent charged from tenants. However, before doing so, several things need to be taken into consideration.

First, check out the lease agreement signed with tenants to ensure there is no clause in it specifying rent will not be raised during the term of the lease. If such a clause exists as part of the agreement, then it will not be possible to raise the rent until the lease expires. The lease terms must be honoured, even though the rent amount may not cover your expenses.

It means, you will have to bide your time till the lease comes up for renewal, at which time negotiations for increasing the rent may be broached with tenants. While, some of them may be prepared to pay the extra charges, a landlord must be prepared for other tenants to oppose the increase or move out. As preparation for such an eventuality, advertisements to fill any rental vacancies arising out of an increase in rent should be taken out.

Though, it must be borne in mind, every landlord has to provide existing tenants with sufficient notice that a rent increase is in the offing. Usually, a 30-day notice is enough, but check out state or local laws as they may differ slightly on the notice period.

As well, certain states have rent control measures in place, limiting the amount of rent that can be legally charged from tenants, so as to stop landlords from over-charging. If you do not wish to become embroiled in a legal battle, ensure you comply with all applicable rent control laws. As well, make certain the local housing market supports your rent increase demand. If a majority of properties in the area are charging less rent than you are asking, you may not be able to retain your existing tenants or attract new ones.

Also, remember small gradual rent increases go down a whole lot better than huge, one-time ones. Negotiate with good tenants in case they cannot meet the new rental charges. As you are aware, good tenants are extremely difficult to find, and a landlord should be prepared to bend a little to retain them. Perhaps, services can be traded for the rent increase amount, such as, odd jobs around your rental property or taking care of the grass. To avoid accusations from other tenants regarding favouritism, record the odd jobs the tenant has taken on in lieu of a rental increase.

And, remember, even though you are trading services for rent, you will still need to claim the entire rent amount as income on tax returns. Take for example, if you are charging $600/- per month as rent, but your tenant only pays $550/- plus mows the grass, then the entire amount of $600/- must be claimed as income. However, the $50/- in lieu of services can be deducted as property expense. To be on the safe side, check it out with your tax advisor before doing so!

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