Rent Increases: Giving notice
The REIQ has received reports of some confusion about when to provide notice to increase rent during a fixed term tenancy agreement, if the rent increase date falls within the first two months of the agreement.
The REIQ’s best practice position is that rent cannot be increased within the first two months of a tenancy agreement, because the requisite notice cannot be given to the tenant before the commencement date of the agreement under which rent is to be increased.
If the tenancy agreement is being renewed, this means the notice should not be given prior to the commencement date of a renewed tenancy agreement for the same reason.
The REIQ takes this position because a notice cannot be given under an agreement that is not in effect, and therefore may not legally exist yet.
There is a risk that a notice given to a tenant before the agreement taking effect may be deemed invalid.
If a rent increase has been affected by way of an invalid notice, then there is a risk that the rent increase is invalid, and if the tenant then later disputes the rent increase, your client may be ordered to repay to the tenant the difference of rent which was invalidly taken. For this reason, it is essential that notice is given correctly.
If you are unsure of whether a notice has been validly given, it is recommended that you seek legal advice.
What is needed to increase rent under a general tenancy agreement?
Property managers should ensure they follow the advice of the Residential Tenancies Authority (RTA) that rent cannot be increased during a fixed term unless it is stated in the tenancy agreement and all of the following occurs :
- the agreement states the rent will be increased;
- the agreement states the new amount (or how it will be worked out);
- the property manager gives the tenant at least two months' notice in writing for a general tenancy; and
- it has been at least 12 months since the tenancy started or since the last increase.
How do I give notice to effect a rent increase under a special term?
As noted above, property managers must give the tenant a separate written notice of a rent increase which will take effect under a special term included in the tenancy agreement.
The rent increase will not automatically come into effect because it is in the agreement.
There is currently no prescribed form to give such notice. The notice must include the increased rent amount and the day the rent increase will take effect.
The REIQ has developed a Notice of Rent Increase to assist property managers to compliantly give notice of a rent increase, if they have used the REIQ Special Condition – General Tenancy – Rent Increase During a Fixed Term Agreement.
This form is now available in Realworks under the Property Management list.
If a different special term has been used, then it is recommended to follow the RTA’s advice as to what the notice must include and to seek legal assistance to draft the notice to comply with requirements and align with the relevant special term.
If you are an REIQ Member and you have a question about rent increases, you can contact the Property Management Support Service on 1300 697 347 or email@example.com for free best practice agency advice.
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