How to handle rent increases as a property manager
Market trends, renovations, local infrastructure changes, and a host of other reasons may be good cause to increase the rent of a property.
As a property manager, you have access to data that may suggest your landlord should bump up the rent, or they might come to you with a request to increase it.
Regardless of what has led to the rent increase, there are two major pitfalls to navigate when handling it: the legal and the interpersonal.
Firstly, unless stated in the lease agreement, rent cannot be increased during a fixed term. Even if the increase is outlined in the agreement, the tenant must be given at least two months' notice in writing. Additionally, rent can only be increased if it has been six months or more since the last increase or since the tenancy started. The outlined increase should specify the new rental amount, and the day it takes effect.
The only point of difference in a periodic rental agreement is that the lease does not need to have the rent increase outlined in the agreement ahead of time. The two months' notice and six months between rent increases still apply.
If it has come time to renew a tenancy with a new lease agreement, the rent can be increased. Of course, the tenant is not obliged to agree to or sign the new agreement. And, as above, the rent can also only increase if it has been at least six months since the previous rent increase.
If it has been at least 11 months since the last rent increase (or the start of the tenancy), the bond may increase with it. The tenant must pay the bond difference by the date stated on the rental increase notice, which must be at least one month after the date the tenant received said notice. And, of course, any extra bond must be lodged with the RTA using a Form 2.
If the tenant wishes to dispute the increase, they can apply to QCAT for a judgment. When making its decision, QCAT will take into account the following considerations, as well as anything else it may consider relevant:
- rent of typical nearby properties
- difference between proposed and current rent
- condition of the property tenancy term, and
- period since last rental increase
In a fixed-term rooming agreement, there still needs to be a notice that the rent will be increased, as well as either the new rental amount, or an explanation of how the new rent will be determined.
In the event of a new agreement, there is no notice period required.
In a periodic rooming agreement, rent can be increased at any time, provided four weeks' notice has been provided, and the notice should include the new amount, as well as the day it takes effect.
The relationship with the tenant
The ideal situation for every property manager is a rent roll filled with good, long-term tenants. To keep those tenants in good standing, it's vital to maintain a positive relationship with them. Therefore, if you're increasing the rent on any of your properties, broach the issue openly and honestly with your tenant.
Don't wait for them to read it in the new lease agreement, because it will feel as though you're trying to sneak the rent hike in.
You must provide at least two months' notice, but if you know you'll be increasing the rent before then, let your tenant know as soon as possible. They'll appreciate the extra notice, and it should make them more likely to accept the increase, saving you the time and effort of finding new tenants.
As mentioned earlier, your tenant may feel that the rent increase is excessive or unjustified. If they broach this issue with you, it's important to not be dismissive.
Listen to the tenant's reasoning, and be receptive to any requests they have. For example, the tenant may only be willing to pay the increased amount if the walls are repainted, or the kitchen sink replaced, etc. While you aren't obliged to agree to their demands, best practice is to listen to and understand their requests, and explain why any desired changes won't be made.
If the tenant offers an unrealistic ultimatum, by way of demanding upgrades to the home, or a significantly smaller increase (or no increase at all), it's probably time to stand your ground. Your client is the landlord, and if the tenant is unwilling to meet the requests of your client, it's time to find a tenant who will.
There's also every possibility the tenant is bluffing, too, and by refusing their ultimatum they may decide to agree to the new terms.
Ultimately, the most important part of handling a rent increase is ensuring you're acting within the law, and maintaining best practice principals. Anything you can do to maintain a positive rapport with your tenant is a bonus, and not one that should be overlooked.
Follow the rules, and do your best to keep all party's happy, and life as a property manager will be that much easier for it.
For further information, visit https://www.rta.qld.gov.au/Renting/During-a-tenancy/Rent-and-other-bills/Rent-increases
Important disclaimer: This article is provided for general information only, and the author is not engaged to render professional advice or services through this article. Readers should satisfy themselves as to the correctness, relevance, and applicability of any of the above content, and should not act on any of it in respect of any specific problem or generally without first obtaining their own independent professional legal advice.
15 Nov 2019
3 min read
Are your property transactions safe from cybercrime?
The property market is the perfect playground for cybercriminals - large sums of money are constantly being transferred between parties with the majority of communications sent via email.
15 Nov 2019
5 min read
Be careful what you do with confidential information
The recent settlement of a claim between a real estate agency and a former employee serves as a timely reminder to real estate professionals that utilising a former employer's confidential client information can be very costly.