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Tips and Guidelines for Increasing Rent

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Posted by Pete Evering on July 10, 2020
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Tips and Guidelines for Increasing Rent

Raising the rent on your property can be a delicate situation to maneuver. There are specific laws and rules that must be followed concerning a rent increase, and in many cases, you may want to avoid losing your tenants if you have a good relationship with them. Trustworthy and respectful tenants can be more valuable than an increase in rent. Here’s a rundown on everything you should consider when increasing rent on a rental property.

Rent Increase Laws

The first thing to consider when increasing rent are California state laws that protect tenants by restricting the increase of rent for certain properties. Under the Tenant Protection Act of 2019, landlords of rent controlled properties must adhere to the following restrictions:

Rent Increase Limit: You can only increase the rent on your property by 5% plus annual inflation below 10%. Currently, California inflation is about 3%, so you would be able to increase rent by about 8%.

Rent Increase Frequency: You may only raise the rent on your property two times within a 12 month period. The increase amount for the entire 12 month period cannot exceed the amount limit above.

Other Tenant Protections

Tenants have multiple protections during a rent increase that go beyond California law specifically. These include:

Rent Increases Must Occur Outside of the Lease Term: You cannot increase rent during a lease term. Unless the lease agreement specifically states otherwise, you can only propose a rent increase after the lease expires, when a new lease agreement is going to be signed.

Adequate Written Notice: Landlords must offer written notice of a rent increase at least 30 days beforehand. For larger increases, a longer notice time is required. In California, if the rent increase exceeds 10%, 60 days notice must be given.

Illegal Rent Increases: A tenant can take a landlord to court if they feel that a rent increase does not follow the law or is an act of discrimination or retaliation. A retaliatory rent increase would be a direct response to the tenant’s behaviors.

Security Deposit

Typically, the initial security deposit of a rental property is based on the monthly rent. This means that the security deposit amount can also be affected by a rent increase. Under California law, the maximum security deposit for an unfurnished unit is two times the monthly rent, and for furnished units it is three times the rent. Therefore, you can request an additional security deposit payment if the tenant accepts the rent increase. This would be paid at the same time the rent increase takes effect, and not during an active lease term.

How to Write a Rent Increase Letter

Once you’ve made the decision to increase rent, delivering the news to your tenant can be a difficult process. There are a number of important guidelines you must fulfill to ensure you’ve given adequate written notice, and you will want to be as friendly as possible. Be sure to include the following in your written notice:

• Name of the tenant
• Name and contact information of the landlord
• Date of the written notice
• Date of rent increase
• Property address
• Current monthly rent cost
• Rent increase amount

We suggest keeping the letter short and simple, and using personable and friendly language to maintain a good relationship with the tenant. Provide a brief explanation for the rent increase to offer transparency and help the tenant understand. You may also include a small form below the letter to be signed and returned to confirm the tenant’s agreement to the rent increase. Here’s an example template of a basic rent increase letter:

[Tenant Name]
[Property Address]
[Date of Notice]

Dear [Tenant Name],

Due to consistently rising housing costs, it has become necessary to increase your rental amount. This [30/60] day notice serves as the required notice per California legal regulations.

Beginning on [Rent Increase Date], the monthly rental amount for your residence, [Property Address], will be increased to [Rent Increase Amount]. All other terms of the original rental agreement will remain in effect.

Please sign below to confirm your agreement or reject the change to the rental amount to indicate a termination of tenancy. I appreciate your cooperation and I hope to hear from you soon. Feel free to contact me with any questions or concerns.

_____ I accept the new rental amount.

_____ I do not accept the new rental amount and will be sending proper notification.

Tenant(s) Signatures:

_______________________________________________ Date: ______________

_______________________________________________ Date: ______________

All the best,

[Landlord Name]
[Landlord Contact Information]

Of course, as your property managers, Utopia Management would assist you every step of the way in the event of a rent increase, from deciding on an increase amount, to crafting a rent increase notification and delivering it to tenants. With Utopia, you can count on us.

Get North Bay Califonia Property Management 

For North Bay California Property Management Contact Utopia Management today by calling us at (800) 294-4656 or click here to connect with us online.

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