To raise or not to raise the rent, that is the question.
South Florida landlords often struggle with the topic of rent increase. It can be tempting to raise the rent to earn more each month. After all, landlords have to pay for their insurance premiums, property taxes, and so on. On the other hand, raising the rent could result in losing quality tenants, which means more vacancies.
But can landlords legally raise the rent in the first place? And if they can, does that mean they should? In this article, we’ll walk you through the dos and don’ts of raising the rent on your South Florida rental property.
Can landlords raise the rent?
Unless your property is in a city that has restrictions regarding the rent increase, you can raise the rent. This, however, depends on the arrangement that you have with your tenant. If your tenant is on a lease, you can’t raise the rent during the entire tenancy (i.e. six to twenty-four months). This is because a lease sets a fixed rate that can’t be changed until the end of the lease term.
If your tenant is under a rental agreement (i.e. month-to-month), you can raise the rent as long as you provide proper notice. In some states, landlords are required to notify their tenants at least thirty days prior to implementing the rent increase. Additionally, some states don’t consider oral notices, so it would be in your best interest to ask your property manager if your notice needs to be in writing.
Remember to store copies of your written rent increase notice in case a tenant claims that you illegally raised the rent.
When can’t landlords raise the rent?
Your rental rate should be competitive, but it shouldn’t be unreasonable, either. Here are some situations where you can’t raise the rent:
- Raising the rent during the lease term
- Raising the rent without proper written notice
- Raising the rent in an area that is rent-controlled
- Raising the rent as retaliation against a tenant
- Raising the rent as a discriminatory act
- Raising the rent to force a tenant to move out
- Raising the rent beyond what is allowed by law
If you do any of the things listed above, your tenant can take you to court. And, chances are, you’ll end up on the losing side.
How high can landlords raise the rent?
If your rental property isn’t in a rent-controlled area, you can raise the rent if you decide that it’s necessary. However, it’s crucial to understand that increasing the rent won’t always be beneficial. If the rent increase is ridiculously high, you run the risk of losing long-term tenants. Here are some helpful tips on calculating how much to raise the rent:
- Compare rates. How much are similar rentals in the area going for? Research the rates of rentals that are similar to yours. For instance, if you have a two-bedroom home, compare it to other two-bedroom homes in the neighborhood. If they’re going for $1,000/month, you should also set yours at around $1,000/month.
- Refer to the real estate market. What is the average rent in the U.S.? What’s the average rent in the state? Answering these questions will help you raise your rent competitively without over-pricing your property.
Not sure how to calculate the rent increase for your South Florida rental property? Consult a property management company today.
Does rent increase affect the security deposit?
The short answer is yes. Security deposits are usually the equivalent of two months’ worth of rent — for example, if the rent is $1,000/month, then the security deposit would be $2,000. Hence, if the landlord increases the rent to $1,200/month, the adjusted security deposit would rise to $2,400.
It’s worth mentioning that some states set a cap with regard to the security deposit. For instance, in New York, the security deposit can’t exceed one month’s worth of rent.
What does “retaliation” mean?
As we mentioned earlier, landlords can’t raise the rent if the purpose is to retaliate against a tenant. While it’s common to have landlord-tenant conflicts, landlords should not raise the rent as an act of vengeance. Similarly, landlords shouldn’t increase the rent to drain the tenant financially, forcing them to end their lease early. If landlords do any of these, their tenants may take them to court.
How does discrimination apply to a rent increase?
If you increase the rent on your South Florida property due to your tenant’s race, religion, gender, national origin, disability, familial status, or age, you will be held liable for violating the Fair Housing Act.
For example, if you raise the rent after finding out that your tenant recently came out, you may be sued for discrimination. Another example would be raising the rent only for Muslim families in your multi-family property. To avoid discrimination charges, make sure that you raise the rent equally.
Can tenants protest a rent increase?
If the reasons for the rent increase aren’t discriminatory or retaliatory, there’s nothing your tenants can do to stop you. However, it would be worthwhile to hear them out. Although your goal may be to earn more money, it shouldn’t come at the cost of losing long-term tenants. Remember, responsible tenants are hard to come by. When you’ve been lucky enough to lease your property to tenants that pay on time and respect the property, you should think twice about increasing the rent.
Hence, consider talking to your tenants before you raise the rent. Listen to their concerns. If they tell you that they would leave due to the rent increase, you may want to reconsider the rent increase.
It can be tempting to increase the rent. After all, every landlord wants a lucrative investment. However, a rent increase isn’t that simple — one wrong move and your investment could crumble. That’s why you should consider hiring a property management company like Luxury Property Care. As your full-service property management firm, we’ll make sure that your rental stays profitable and that your tenants stay happy.