They're every resident's least favorite thing: rent increases. But for property managers, increasing rent is a necessary part of your fiduciary duty to investors.
When it comes time to implement a rent increase, it's important to communicate with your residents clearly and professionally. The goal is to minimize conflict and prevent any unwanted surprises. Writing a rent increase letter is a critical first step in this process.
By clearly communicating the reasons behind the rent increase, such as inflation and increased operational costs, you can help your residents understand the rationale behind your decision.
A note on language: Here at Second Nature, we prefer to use the terms "resident" and “residency” rather than “tenant” and “tenancy,” to emphasize the human element of property management work. However, there may be instances where terms such as "tenant" are used for legal or industry-standard purposes within documents or communications. In these cases, please know that our intent remains the same – to provide clear, accurate, and meaningful information to all people involved in the business relationship.
When should you increase the rent?
You should be considering rent increases periodically to keep up with the rising costs associated with property maintenance and management. Specifically, inflation drives up the costs of utilities, repairs, labor, and general upkeep, making it essential to adjust rents to cover these expenses.
Other rising expenses include property taxes, insurance costs, and even the costs of improvements—all contributing to the need for rent increases. By aligning rent adjustments with these economic factors, property managers can ensure the financial sustainability of their properties while continuing to provide quality living conditions for their tenants.
What to consider when increasing the rent
There are several factors to consider to ensure fairness and transparency during a rent increase. These considerations will not only help in setting a rent increase amount that's justified, but also in maintaining a positive relationship with residents.
Rent competition
Understanding the rental market's competition is crucial. Evaluate the current market rates for similar properties in your area – this will help in setting a competitive yet reasonable rent increase that aligns with local conditions.
Lease term
Consider the length of the lease term currently in place. Typically, longer lease terms might warrant smaller, more gradual increases to retain residents, while shorter terms may allow for more frequent adjustments based on market trends.
Changes to property value
An increase in property value can often justify a rent increase. This should reflect market conditions, the property's value, and any improvements that have been made during the lease term. Transparency about how this amount is calculated can help mitigate resident concerns.
Additional property costs
Make sure you're also considering any increases to other property costs. For example, if the property is a condominium or is in a home owner's association, factor in any special assessments or increases to dues.
State notice period requirement
Each state has specific legal requirements for notice periods before a rent increase can take effect. Ensure that you comply with these regulations to avoid legal issues and give residents enough time to plan for the change.
Security deposit
Review the impact of the rent increase on the security deposit. In some states, the security deposit may need to be adjusted in accordance with the new rent amount. Ensure that any changes are clearly communicated and legally compliant.
Reasons to send a rent increase letter
Sending a rent increase letter is a necessary step in maintaining transparent and professional relationships with residents. Here’s why they're essential:
Legal compliance
Some states and localities may have specific requirements dictating how a rent increase is communicated. A rent increase letter can help you stay compliant with notice periods and documentation. It serves as an official record of the change and helps protect against potential disputes.
Clarity and transparency
Providing a written notice offers clarity to residents about the new rent amount, the effective date of the increase, and the reasons behind it. This transparency helps maintain trust and minimize misunderstandings. Communication is one of the top factors in resident retention, so make sure you're putting in time to make things clear.
Professionalism
A formal rent increase letter reflects a professional approach to property management. A well-written letter will come across as intentional, well thought out, and respectful, rather than making residents feel like you're just making decisions on the spot or without solid reasoning.
Record keeping
Documenting rent increases helps maintain accurate records for your team, the investor, and the resident. This can be crucial for future reference, additional lease renewals, or if any legal issues arise.
By considering the factors that go into the rent increase and clearly communicating the reasons, property managers can ensure a smoother transition and foster a positive relationship with their residents.
What should a rent increase letter include?
Here's what should be included in a rent increase letter to ensure your residents have all the information they need:
1. Friendly tone
- Use a warm and polite greeting while also keeping things professional.
- Express appreciation for the resident's tenancy, and highlight any specific areas where they've gone above and beyond.
- Regardless of any past tension, make sure to keep a respectful tone throughout.
2. Resident information
- Include the names of all residents on the lease, even if you primarily communicate with only one resident.
- Include the address of the property.
- Mention the end date of their current lease agreement.
3. Clear announcement of rent increase
- State the effective date of the rent increase.
- Clearly outline the new monthly rent amount.
- If applicable, mention any changes to additional fees like utilities, parking, or pet rent.
- Include any information on how the rent increase will impact the security deposit, if applicable.
4. Justification for the increase
- Highlight the specific reason or reasons for the rent increase. This could include rising property taxes, increased maintenance costs, market value adjustments based on comparable rentals, or significant property improvements you've made.
- Be specific and provide data or evidence to support your claims whenever possible. For example, mention the percentage increase in real estate property taxes or highlight the specific property improvements that are enhancing the resident's living experience.
5. Consequences of nonpayment
- Clearly explain the consequences if the new rent amount is not paid by the specified date. You can cite the terms of the lease agreement to reinforce these consequences.
- Remind the resident of the potential late fees or penalties that may apply.
- Describe the steps that will be taken if non-payment persists, such as the issuance of a notice to vacate or potential eviction proceedings.
- Emphasize the importance of timely communication from the residents if they foresee difficulties in making the payment, and encourage them to discuss potential solutions or payment plans.
6. Next steps for the resident
- Be clear about whether the resident needs to take any action in response to the change. For example, if they have automatic payments set up through their resident portal, be clear about whether they'll need to adjust the payment amount, or whether your property accounting software will automatically draw the new amount moving forward.
- Briefly remind residents of their right to review their new lease agreement.
- Express your willingness to answer any questions they may have regarding the rent increase.
- Clearly state your contact information (phone number and email address) for easy communication.
Sample rent increase letter template
Below is a template you can use for your rent increase letter. Simply customize it with your specific information.
[Your Property Name and Contact Information]
[Date]
[Resident names]
[Address of rental property]
RE: Rent increase effective [effective date]
Dear [Resident names],
Thank you for continuing to rent with us. This letter is to inform you of an upcoming rent increase for [property address], effective [effective date]. Your current monthly rent of [current rent amount] will be adjusted to [new rent amount]. Additionally, [mention any changes to additional fees, e.g., "the monthly pet fee will increase to $XX"].
We understand rent increases can be disruptive, and we want to be transparent about the reasons behind this adjustment. The increase is necessary due to [list specific reasons for the increase, e.g., "rising rental rates for comparable units… ," or “neighborhood revitalization resulting in enhanced value…”]. [If applicable, provide data or evidence to support your claims].
We value you as a resident and appreciate our relationship. You have the right to review your lease agreement if you have any questions about its terms. We are also happy to answer any questions you may have regarding this rent increase. Please feel free to contact us at [phone number] or [email address].
Sincerely,
[Your name and the name of your property management company]
For example, our rent increase template looks like this:
How to send a rent increase letter
There are multiple things to consider when choosing how, logistically, to deliver a rent increase letter. You want to keep the process as simple as possible, but you also may need verifiable proof of the notification in case of any future disputes.
First and foremost, you’ll need to consider local regulations. We highly recommend consulting with a lawyer specializing in landlord-tenant law to determine the mandated method for delivering rent increase notices.
Some states or municipalities may require certified mail or another verifiable method (e.g., signed delivery receipts). Don't skip this step; non-compliance with local regulations can lead to legal issues down the line.
Delivery method options
- Certified mail: This is generally the safest option. Certified mail provides a receipt confirming the letter's delivery and the date it was received. This documentation can be crucial in the event that there's a future dispute or legal proceeding. While certified mail is slightly more expensive than regular mail, the added security it offers can be worth the cost.
- Regular mail with signed delivery receipt: This option offers some level of proof of delivery but may be less secure than certified mail. While unlikely, residents can potentially refuse to sign for the receipt, leaving you with more work to do to make sure they're informed.
- Hand delivery: If feasible, handing the rent increase letter to the resident in person and obtaining a signed receipt is the most secure method. This is more challenging for scattered site properties.
Note that while some residents might appreciate the convenience of email, it isn't always the most reliable notification method. Consider your residents' demographics and preferred communication channels when selecting your delivery method.
Regardless of what you choose, the original lease agreement you have with your residents should explicitly state acceptable methods for delivering important notice letters, including rent increases. Make sure you're adhering to the guidelines set out in the lease.
A note on property accounting software
Property accounting software can be useful for maintaining a centralized repository of all your communications with residents, including rent increase letters. It's also a useful tool for furnishing clear audit trails and documentation in case of disputes. Make sure that the terms outlined in your rent increase letter are accurately reflected in your property management software to prevent any accounting mishaps.
Rent increase FAQs
Q: How many days’ notice of rent increase do residents need to be given?
A: The required notice period for a rental increase can vary depending on your location and the terms of your lease agreement. In general, most states require that residents be given 30 to 60 days' written notice before a rent increase takes effect, though this can vary for year-to-year lease renewals vs. month-to-month. It's important to check local rent control regulations for specific details on timeframes, and consult with a local attorney if necessary.
Q: Can the rent increase be contested?
A: Depending on your location and specific circumstances, residents may have the right to contest a rent increase. For example, rent control laws in some jurisdictions allow residents to challenge rent hikes that are deemed to be excessive. It's best to obtain legal advice from a lawyer specializing in applicable local laws and state laws to understand your options.
Final thoughts
Prioritize clear communication and transparency, and you’ll find you can navigate rent increases effectively while maintaining a healthy and positive relationship with your residents.
Every interaction you have with a resident shapes the way they think and feel about you. The way you communicate a rent increase can make all the difference in your renewal rate and resident satisfaction.
It’s also the perfect opportunity to introduce a Resident Benefits Package (RBP) and remind residents of your role in adding value to their living situation. Learn more about the benefits of Second Nature’s fully managed RBP.
March 7, 2025
