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Home » Property Management » What Percentage Should Your Commercial Property Rent Increase Each Year?

Raising the rent is an excellent way to maximize your real estate investment and increase your returns—the goal of many, if not all, commercial landlords in Florida.

However, increasing your rent can be a challenging process; it often requires careful, calculated decision-making to ensure your tenants remain satisfied.  As a landlord, you naturally want to maintain good relations with business tenants, while balancing that duty with a reasonable return on your investments.

Whether you’re a new commercial landlord or not, you can use this article to navigate through this critical aspect of commercial property management in Florida.

Average Rent Increase for Florida Commercial Landlords

Typically, landlords raise their commercial rent by about 5% to 8% yearly. However, this may not be enough to cover your overall costs, especially if your property is in a competitive market like Miami. The good news is you don’t have to strictly abide by this “rule” simply because other commercial property owners are following it.

In increasing rental prices, there are several factors that you have to consider, such as your monthly cash flow, maintenance, and other expenses that come with owning a commercial property. If you’re unsure what percentage would be best for you, then maybe it’s time to check with a commercial property management company in Florida for a more extensive analysis when setting a rental increase.

Are There Any Florida Rent Control Laws?

There are no rent control laws in Florida. In fact, Florida is one of the few states that prohibits cities and counties from controlling rent – unless the situation calls for it. In certain cases, cities and counties may place a ceiling on rent increases or implement a “rental cap” to provide tenants with relief during times of crisis—essentially, to make housing more affordable. An example of this was the rental cap or limit that many cities set during the COVID-19 pandemic.

So, unless your locale has specifically put a cap on rent increases out of necessity, you may be able to raise the amount you collect—as long as it’s reasonable, of course. Here are some ground rules to can help you through the rental increase process:

Give Proper Notice

Give Proper Notice

Even if there are no Florida-specific laws on giving a rent increase notice to tenants, it would be the most ethical practice to notify your tenants within a reasonable window. The notice period for lease termination is usually the same standard for fair notice for a rent increase. For instance, if your tenants are on a year-to-year lease, then you might give them a 60-day notice.

By giving your tenants ample grace period to prepare for a rent increase, your transparency will also allow tenants to plan their next move.

Important: Some local governments in Florida have set their own regulations regarding the minimum amount of time for notifying tenants. To make sure you remain legally compliant, it would be wise to consult a reputable property management company.

Waiting Until the End of the Lease Term

After you give your tenants the notice, wait until the end of the lease term to increase your rent. Even if there’s no rent control law in Florida, it wouldn’t be in good faith to bump up rental prices when your tenant’s lease term is still ongoing.

Non-Discriminatory or Retaliatory Reasons for Raising Rent

When raising rent, you must, under no circumstances, raise it out of discriminatory reasons, or as a way of retaliating against a tenant. By doing so, you put yourself in the position of violating the Fair Housing Act, which covers commercial properties used for housing purposes (such as apartments) and retail areas within a housing complex.

Discriminatory increase in rent is based on nationality, race, color, age, sex, familial status, and mental or physical disability.Some jurisdictions have added more protection from discrimination for renters, like in Miami-Dade and Broward counties which prohibit discrimination due to a renter’s source of income.

3. Tenant Communication Tips for Commercial Landlords

Tenant Communication Tips for Commercial Landlords

Informing your tenant about the rent increase can be difficult and uncomfortable, and if you’re unsure how you could approach them, here are some tips to help you communicate the increase to soften the blow and keep things under control:

1. Draft a Formal Letter

The first thing you need to do is to write a rental increase notice letter. This letter must include your tenant’s full name, property address, and the date the original lease was signed. After that, you must place the current rent amount and the new rental rate. Formal letters like these are designed to keep things documented for legal reasons—essentially, to show proof that the tenant was notified about your rent increase before it takes effect.

2. Apply Proper Notice

Be sure to include information on the amount of time the tenant has before the increase takes effect. Clearly communicate whether they have several days, weeks, or months, to prepare for this change—this will give them enough time to decide whether or not to renew their lease.

3. Observe Transparency

Observe Transparency

One of the best things you can do as a commercial landlord is to let the tenant know about the reasons why you’re increasing the rent price. When notifying tenants, be sure to provide rental comparison data that supports your decision to increase the rent. Having a well-written letter with full transparency will help you build trust and good relations with your business tenant.

Consider Commercial Property Improvements to Boost Property Value

In navigating commercial property management in Florida, one of the more crucial habits for you to develop is regularly reviewing rental rates of similar properties in your area. By understanding market trends, you can set a more competitive rate for your property.

Additionally, you can also try offering commercial property improvements or amenities, such as getting smart systems, building security, and opting for energy-efficient features. This, combined with the research data you have from market rates, can add value to your property and help justify the need to increase your rental price.

Consult with Commercial Property Managers in Florida

Understanding all the different market data and applying improvements to your commercial property is no small feat. It can get confusing and challenging, considering all the different moving parts that come with owning a commercial property.

To simplify the process, you can always reach out to a commercial property management company in Florida, such as Luxury Property Care. We can help you navigate the different key factors of increasing rent, and ensure your commercial property investment stays profitable while you and your tenants stay satisfied.

For more information, contact us today at (561) 944 – 2992 or complete our contact form.

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