How to Write a Rent Increase Letter (+Free Template)
May 08, 2020
Time for your tenants to renew their lease? Perhaps you’ve been considering a rent increase, but you’re caught in a classic dilemma as a landlord; you don’t want to drive good and loyal tenants away, but you need to see a little more revenue to keep up with rising costs. But you also know that something like two-thirds of renters who move identify a rental increase as part of the reason why.
WHAT WE’LL COVER:
- Chapter 1: How Much Can Landlords Raise Rent?
- Chapter 2: How to Legally Raise Rent for Your Tenants
- Chapter 3: What Is a Rent Increase Notice?
- Chapter 4: When to Send a Rent Increase Letter
- Chapter 5: What to Include in a Rent Increase Letter
- Chapter 6: Free Sample Rent Increase Notice Letter Template
- Chapter 7: How to Send a Rent Increase Notice
Deciding to increase the rent for your tenants can be a significant decision, with plenty of real-world significance.
Given the need to retain quality tenants, you might decide to forego any rent increase. If, for whatever reason, you do decide to increase your rent – even by the normal 3-5% – one way to help take the sting out of the news is by a well-written rent increase letter.
A well-written rent increase letter informs your tenants of the change of rates without being harsh or soulless. It may also provide your tenants with some of the rationalé behind the increase and them to understand why you’re taking such an unpleasant step.
For a landlord considering a rent increase, here are some of the most pertinent questions to consider. There’s also a sample rent increase notification letter to help get you started.
When considering raising your rents, it helps to understand what limitations and considerations you might have. First off, apart from a few exceptions, there is virtually no hard cap to how much you can raise rents. The exceptions are rare indeed – the only states with maximum rent increase limits are California, New York, and Oregon.
There are some other factors to deal with, however. While the exact amount of a rent increase isn’t limited, the timing of the increase and the length of required advance notice are both tightly regulated. But if you feel the need to write a rent increase letter and raise your rates, then there’s an established, legal way to do so.
If you plan on selling the property, raising the rent is often a great way to make the property more attractive to potential investors, but there might be a better solution. If you have a good relationship with your tenants, you might want to first approach them with the option to buy the property. They might be in a position to become homeowners, and it’d save you a lot of money in listing fees. When you’re selling to somebody you know, you simply need to get a Realtor to draft up the purchase and sale agreement, which they can usually do for a flat fee.
Download our free rent increase notice letter for landlords!
1. Decide on New Rent Amount
How much will your tenants’ rent go up? Generally, there are no restrictions on how much you can raise your rent – the only exceptions to this rule are the elusive rent-controlled properties in certain cities. Anywhere else, there aren’t any hard restrictions – but if you raise the rent too much too fast you’re likely to lose occupants.
Losing valuable tenants may be more costly than holding your rent at current levels. Think of it like this: if you raise the rent by $100/month but lose an entire month of rent due to vacancy, how long will it take for the $100 increase to recover that lost revenue? With that in mind, you’ll need to be very careful to calculate an appropriate rent which will bring in the extra income but won’t drive tenants away.
How do you calculate a new rate which is fair to both you and the tenant(s)? The first port of call is to look at the current market in your area. Understandably, most landlords have a tendency to overestimate the market value of their own properties; you need to be careful to take a neutral look at nearby rental units. How does your property compare? What’s the range of available units, and where does your property fall in that range? A quick look at available properties on Craigslist or Zillow can provide you with some valuable insight into the rental market in your area.
To keep the information straight in your mind, it might help to make a complete list of the features and benefits of your property, then compare those to the features and benefits of comparable properties in the area.
Once you have a better grasp of the going rates, you’ll be able to decide exactly what your new rent will be.
2. Check Your Lease Agreement
When can you increase your rent? First, you’ll need to check your basic lease agreement. If your tenant is on a one or two-year lease, you cannot raise your rent until your current lease agreement ends. Towards the conclusion of the current lease, you’ll issue your rent increase notice in preparation for a new lease arrangement.
If your tenant is month-to-month, things are a little different. You can’t raise your rent mid-month, but you also can’t wait until the very end of the month then drop a rent increase letter on their doorstep notifying them of a new (and higher) rent due right away. Most states require some sort of minimum advance notice – a month is typical, but it can be up to 90 days in some areas.
Even for landlords and tenants on a month-to-month basis, raising your rent can be a months-long process.
3. Check Your State’s Notice Period for Raising Rent
Along with the above, double-check your state’s notice period. Again, this varies widely; there are some grey areas built-in, with many rent increases not enforceable within a given time period.
4. Write and Send a Rent Increase Notice
Once you know what your new rent will be, and when you can and should notify your tenants, you’re finally ready to send a rent increase notice. There is a helpful template at the end of this article. But for now, it’s worth noting that your letter will need to balance a neutral tone which notifies your tenant the rent is increasing and that you’re doing it all in accordance with the rules.
How do landlords like yourself ethically collect rent during COVID-19?
A rent increase notice is simply another name for a rent increase letter, although the notice may be a bit more formal in tone and less familiar. Which one you use is up to you, but it’s always best to keep things friendly and avoid a potentially acrimonious situation.
Send your notice well ahead of when you actually need to see increased income from your properties. In some states, like California, even week-to-week rentals can require up to 60 days advance notice before a rent increase takes effect. Don’t wait until the last minute to start the process! You’ll also need to consider what happens if you lose current occupants. Typically, 30-60 days is considered the minimum length of time.
In a month-to-month arrangement, you can send an increase letter at any time of the year, as long as there aren’t any restrictions in the rental agreement. For a yearly lease, rent can only be increased at the end of the current agreement; send your rent increase letter 30-60 days before your lease expires.
Strive for a friendly but simple tone; you don’t need to lapse into complicated, obscure legalese, but neither should you be overly warm and too familiar. Be friendly, but state quite simply what is happening and why.
Rent increase letters fill a couple of general purposes. They notify your tenant, but they also provide important documentation for legal purposes. This is part of the reason why you want your rent increase letter to be simple and straightforward and also friendly and open. If your costs are going up (e.g., property taxes, insurance, interest rate, utilities), you might want to mention that to make the tenant more empathetic to your situation.
On a more detailed note, there are a number of “whats” and “whys” that any rent increase notice needs to answer:
- What is the new rent?
- When will the new rent come into effect?
- When will a new lease be signed (if the tenant agrees)?
- When will the tenant need to move out if they don’t agree to the new rates?
- What happens if the tenant refuses to come to a new arrangement at all?
Even with the negatives, a rent increase letter doesn’t need to be harsh or abrasive; it simply informs the tenant of the upcoming changes and what options he or she has.
The sample rent increase letter above is straightforward and simple. You may make it more formal, or a bit more friendly and personal depending on your circumstances and relationship with your tenants; always remember, though, that these notices are not simply communications but also potential evidence.
On that note, how to deliver your rent increase letter? It’s best to be overly thorough!
Sending a hard copy through the mail is a great starting point. Be sure to keep a copy for yourself, and it may be worth sending the letter through certified mail to give yourself some notice of receipt.
Use email as a second line of communication: attach a copy of the physical letter, and also request that they send a brief response confirming that they’ve received your email. There are plenty of email tools for property managers and landlords to utilize when sending rent increase notices – or any type of resident email.
Delivering the letter in person works fine, depending on your relationship with the recipient and the number of properties you operate. However, note that an oral notification of rent increase is NOT sufficient. You need to have a paper trail and written confirmation that you’ve complied with the applicable laws.
The most important thing to consider when increasing your rent is that you must know the local laws. Rental regulations vary widely state-by-state and even city-by-city, so you’ll need to do your research.
With the information and sample letter above, increasing your rent doesn’t have to be a burden.
Additional Resources for Independent Landlords
Jennifer Harder is a mortgage broker in Victoria, BC. She specializes in home purchases and can accommodate complex transactions, including non-traditional income, unique properties and past credit issues.