Rental Agreements & Rent Increases
A rental agreement, or lease, is a mutual contract between two or more parties of legal age that includes the terms under which a property is rented. "Consideration," which is defined as something of value, almost always money, is a legally required component of the lease. During the term of the lease, rent may not be raised. At the end of the term, rent may be raised to the maximum limit set by a rent control ordinance, if there is one, or to any amount set by the landlord if there isn't.
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Lease Term
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The duration of time covered in a lease sets an initial period during which rent cannot be raised. If the lease is for a one-year term, then the rent listed in the lease cannot be raised for one year. If the lease is for only a month, called a month-to-month lease, then the rent can be raised after one month providing there are no local laws that prohibit this.
State Law
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No states regulate rent raises. However, most state laws regulate the manner and timing of rent raises. They generally require a written 30-day notice to raise rents. This provides tenants with an opportunity to give notice to terminate the rental agreement if they do not want to pay the new rent. It is important to check state law because details vary. In California, for instance, if the rent is raised by 10 percent or more in one year, which includes multiple rent raises that cumulatively exceed 10 percent, a 60-day notice must be given.
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Rent Control
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Rent control is a local law or set of laws that limit how often and how much rent can be raised. As of 2010, four states and the District of Columbia had cities with rent control ordinances which limited rent raises: California, Maryland, New Jersey and New York. The controls vary widely and sometimes pin rent raises to indices such as the consumer price index. They sometimes include provisions that apply to some property types and not others and sometimes regulate how notice is to be given. Your city's website or local Board of Realtors or tenants' organization should provide details.
Negotiation
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Tenants are free to negotiate rent raises with landlords. Approaching a landlord well before the end of the lease term with rent data accumulated from local property management or real estate groups may head off an otherwise larger rent increase, and in some markets, may even lead to a rent decrease.
Other Considerations
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Absent rent control landlords often are perceived as having the upper hand in setting rent raises. However, in reality, the rental market usually has the greatest influence on rents. If average rents have gone up in your area 15 percent in the past year, a tenant can probably anticipate a 15 percent rise in rent at the end of his lease term. If you are a landlord or tenant, your wisest move is to familiarize yourself with rent ranges in your area before taking action.
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References
- Photo Credit apartment for rent image by dead_account from Fotolia.com
