How to Write A Rent Increase Letter

Raising rent is a crucial yet challenging task for property managers and landlords. Using a rent increase letter to initiate this conversation is essential. The process of raising rent can be daunting. Set the increase too low, and you miss out on necessary income; set it too high, and you risk losing a responsible tenant. Sending a rent increase letter helps both landlords and tenants navigate this change amicably. Ensure compliance with landlord-tenant laws by providing tenants with a sufficient notice period, typically 30-60 days, to decide whether to renew their lease or move out. 

According to the State of the Property Management Industry Report (2020), released by Buildium, as much as 47.8% of property managers named “growth” as their top priority. Every property owner wants the rental to reflect the prevailing market rates. And, at the same time, be able to retain renters. The good news is that if the tenant-landlord relationship is healthy, a reasonable increase in rent is an easy follow-through. The rent increase letter to tenants needs to be warm and should adequately explain the reason for increasing the rent.   

Further, let’s look at some of the specific laws of your state related to the increase in rent. This would include knowing: 

• The limit that has been set on an increase in rent especially since rent control and rent stabilization statutes are in effect 
• The frequency at which you can increase the rent 
• If rent increases can be made within the term of the lease 
• The notice that needs to be given for a rent increase, and more 

What is a Rent Increase Letter?  

A rent increase letter serves two crucial purposes in property management, as explained below:  

• It clearly communicates the upcoming rent adjustment to the tenant, providing them with essential information about their new rent amount and the effective date of the change. This transparency helps tenants understand their financial obligations and allows them time to plan accordingly. 
• The letter serves as documentation that the landlord has adhered to legal notification requirements. By providing written notice, landlords demonstrate compliance with local and state regulations regarding rent increases, which helps protect both parties and prevents potential disputes. 

Creating a standard rent increase letter on your property’s letterhead offers significant benefits. It streamlines the process of notifying tenants whose leases are expiring. This standardized approach ensures consistency and professionalism in communication, reinforcing trust and clarity. Additionally, having a pre-designed letter helps maintain compliance with legal requirements and reduces the risk of errors, making rent adjustments smoother and more efficient for both landlords and tenants. 

When Can a Landlord Increase the Rent? 

Landlords typically have the opportunity to increase rent when the current lease ends, though there are exceptions. Cities or states with rent stabilization or rent control laws may limit the amount or even prohibit rent increases. However, landlords with single-family homes or owner-occupied multifamily properties with four units or fewer are often exempt from these regulations. 

Generally, landlords must wait until the end of the lease to raise rent unless the lease agreement permits increases during the lease term. For month-to-month leases, most state laws require landlords to provide at least 30 days’ notice before increasing rent. Some states and localities may require more notice or cap the increase amount. 

Given the complexities of rent increases, landlords should review state laws and consult a real estate attorney before issuing a rent increase notice. 

Factors to Consider Before Increasing the Rent 

When considering a rent increase, evaluate a few key factors before notifying your tenant: 

• State Laws: Check your state’s regulations on rent increases, as some areas have rent control laws or specific notice requirements. Research these laws or consult an attorney for guidance. 
• Timing: You can only implement a rent increase at the end of a lease term. For month-to-month leases, provide a 30-day notice for the next month. For fixed leases, apply the increase at the start of a renewed term. 
• Local Market Rates: Ensure your rent increase aligns with local market rates to stay competitive. Use local rent data for accuracy rather than the advertised prices. 
• Standard Increase: Generally, a 3-5% annual increase is typical, but factors like population growth or local developments might justify a higher adjustment. Consider running a rent estimate report for accurate pricing. 
• Security Deposit: If your security deposit is tied to rent, adjust it to reflect the new rent amount. For example, if the rent increases by $50 and the deposit is one month’s rent, collect an additional $50 for the deposit. 

Once you have reviewed these factors and decided on the increase amount, communicate it with your tenant through a friendly rent increase letter. 

What to Include in a Rent Increase Letter 

The rent increase letter is an official document that needs to be professional and to-the-point. However, it also needs to convey a sense of empathy and warmth. The fact that you value your tenants is something that should come across strongly from the letter. Some of the elements to include in the letter are: 

• A warm personal greeting. 
• A brief explanation of the rent increase. It could be on account of the rising cost of conveniences, a new city fee that has been levied, and more. Keeping the communication transparent can go a long way in the tenant looking at the increase favorably as opposed to it being seen as a one-sided demand. 
• You must ensure that the tenant can contact you with any questions.

You are likely to come across several templates of sample rent increase letters online. These can come in handy as they ensure that you include the following key information in your letter: 

• Tenant’s name 
• Property address 
• Landlord name and contact information 
• The date the letter is written 
• The date the rent increase will take effect 
• Current rental amount 
• Amount of rent increase 
• The date the new rent will be due 
• A reference to the lease agreement

While you follow these templates to ensure that all information has been included, it will be worth your while to personalize these letters. It’s also recommended to include a form along with the letter that the tenant can fill out and return. You could choose to hand-deliver the letter or mail it with a return receipt. If you decide to mail the letter, you need to keep in mind the time taken for the letter to reach the tenant, in working out the requisite number of days for the notice. 

When and How to Send a Rent Increase Letter 

The required notice period for a rent increase varies by state and lease type. Typically, you should notify a month-to-month tenant 30 days in advance. For fixed-term tenants, aim to give 30-60 days’ notice. 

Consider the lease’s notice-to-vacate policy when determining the timing for sending a rent increase letter. For instance, if the lease requires a 30-day notice for moving out, send the rent increase letter 30 days before that deadline to ensure timely and smooth communication with your tenants. 

You have three options for delivering the rent increase letter: 

• Certified Mail: This method is often preferred and may be required by local regulations. It provides a delivery receipt that you should keep for your records. 
• Email: This can be convenient but ensure to request a read receipt to confirm the tenant received it. 
• In-Person: This ensures the tenant receives the letter and allows for immediate discussion, but it may put the tenant on the spot. 

Also, it is a good practice to keep a copy of the rent increase letter for your records. 

Conclusion 

Landlords can generally raise rent when a lease ends, but this depends on local and state laws. For month-to-month leases, a 30-day notice is often required before increasing rent. In areas with rent control, there may be limits on the amount or possibility of increasing rent. Landlords should compare local rents, consider inflation, decide on the increase amount, and check if adjusting the security deposit is needed to ensure a fair and legal process. 

Reach us at BFPMInc. for further inquiries related to rent increase letters or property management.