Raising rent is a fact of landlord (and tenant) life, but the process can be daunting. Make the increase too low and you risk losing needed income, but if it’s too high you can lose a responsible tenant. The hassle of getting a new tenant to sign a new lease agreement may cost more in the long run than the rent increase you can gain. Fortunately, sending a rent increase letter to tenants helps both parties navigate the process in a way that keeps everyone happy.
Our guide will walk you through how to write a rent increase letter to legally notify your tenants of an upcoming rent increase and includes a template to make sure you have all the necessary details.
In this article, you will find:
What To Know About Raising Rent
Raising rent is a delicate line to walk, but if you consider several factors when raising your tenant’s rent, there’s a good chance your tenant will stick around.
Why You Should Raise Your Tenant’s Rent
Landlords raise the rent for a variety of reasons.
Increased expenses related to the property are often the most significant reason you may be looking to raise the rent. Maybe your state or local taxes have grown, or your insurance premiums for the property have gone up. If you are renting out a home, perhaps the HOA fees for the neighborhood have gone up. Or it could just be the cost of living. Regardless, these are understandable reasons to raise your rent.
Another popular reason for raising rent is for needed investments in the property itself, like renovating outdated units or adding amenities to keep the property competitive with the local market.
You may also want to raise the rent to keep pace with the fair market rent in your area.
While it is also your legal right as a landlord to raise the rent, your tenants should be more amenable to the increase if you provide a legitimate, reasonable explanation for the raise.
Reasons You Can’t Raise Your Tenant’s Rent
You can never raise the rent as punishment for a tenant’s behavior, such as paying late, writing a negative review, or filing a claim against you. You also cannot raise the rent to force the tenant to move out because they are a poor tenant or you dislike their race, religion, or sexuality. Raising rent for any of these reasons violates Fair Housing laws and can lead to a lawsuit alleging landlord retaliation or discrimination.
What Is a Rent Increase Letter?
A rent increase letter serves two purposes:
- Communicates the increase to the tenant
- Serves as documentation that the landlord followed notification statutes
It’s in your best interest to create a standard rent increase letter on your property’s letterhead, saving you time each month when notifying tenants whose leases are expiring and ensuring you send a consistent message to each tenant.
Before Writing a Rent Increase Letter
If you find yourself considering a rent increase, there are a few factors you’ll want to weigh before letting your tenant know.
- Your state’s laws regarding rent increases: Some states have rent control statutes that limit how much you can raise the rent or require specific notification timelines or methods. Do a little research into your state’s laws or talk to an attorney.
- When the increase will take effect: Regardless of your location, you can only raise the rent at the end of a lease’s term. For a month-to-month lease, you can increase the rent for the next month (usually with a 30-day notice), and for a fixed lease, only at the start of a renewed lease.
- Local market rates: When deciding how much to raise the rent, you want to remain competitive with the local market; otherwise, your tenant will move to a different rental. Consider local rent data rather than advertised prices for the most accurate information.
- Standard rental increase: The standard rental increase is roughly 3-5% per year, which is what your tenants will expect. However, population and job growth or a revitalization initiative in your area may lead to increased demand for apartments, which can drive up the cost of rent beyond that 3-5% pro forma increase. To price your rental correctly, run a rent estimate report to see what others in the area are charging.
- Security deposit: If the monthly rent determines the security deposit, you’ll also want to collect the additional money to cover the security deposit. For example, if your security deposit rate is the equivalent of one month’s rent, and your rent is increasing by $50, you’ll want to ask for an additional $50 to add to their deposit.
Once you’ve considered these factors and determined the amount of your increase, it’s time to let your tenant know with a friendly rent increase letter.
How To Write a Rent Increase Letter
The content of a rent increase letter should be clear and to the point, yet friendly. Your goal is to clearly communicate when the rent increase will occur, how much it will increase, and what the tenant should do next.
A notice of rent increase letter should include the following:
- Your name and contact information
- Date of document
- A greeting that addresses each tenant by name
- The property’s address
- The date the original lease went into effect
- The date the original lease will end
- The current rent amount
- The proposed new rent amount
- The date the new rent amount takes effect
- Notice date if the tenant decides not to renew their lease
- Your signature
- Date of your signature
- Place for tenant(s) to sign in agreement with the rent increase
- Date of tenant’s signature(s)
A few other things to keep in mind when writing a friendly rent increase letter:
- Be professional yet courteous: You don’t want to be emotional, but you also don’t want to sound like a robot.
- Be genuine: It’s okay to compliment your tenant and tell them you value them, but only if you mean it.
- Be clear: Edit the letter so it’s free of grammar errors and compliant with local laws.
- Offer an explanation: Briefly explain why the rent increase is necessary. Include comparable rental prices in your area if necessary. Most tenants will understand a reasonable increase if it’s explained to them.
- Explain the benefits: If the rent increase is due to improvements to the building, let them know how those updates will improve their lives.
- Include the lease renewal paperwork: It never hurts to include the lease renewal paperwork with the letter. When they sign the rent increase letter saying they agree to it, they can sign the new lease on the spot and return both pieces of paperwork, streamlining the renewal process.
Rent Increase Letter Template
Download TurboTenant’s rent increase letter template and personalize it to suit your rental. Use the sample rent increase letter above as a guide when personalizing it.
Download our free rent increase letter template!
When and How To Send a Rent Increase Letter
The required notice period varies by state and lease type. Generally, you need to notify a month-to-month tenant 30 days before a rent increase. For fixed-term tenants, the general expectation is to give 30-60 days’ notice.
When deciding when to send a rent increase letter, consider the lease’s notice-to vacate policy. For example, if the lease requires 30 days’ notice that a tenant is moving out, you should send the rent increase letter 30 days before that. A tenant informed of a rent increase after their notice-to-vacate deadline will be even more upset if they have to pay a late notification fee.
Once you know when to send it, you have three options for delivering your rent increase letter:
- Certified mail is the preferred method and some jurisdictions require it. By using certified mail, you will receive a delivery receipt, which you should keep on file.
- Email may be preferable for your tenant, but in this particular case, you’ll want to add a read receipt, so you know your tenant received it.
- In-person can seem helpful since you know they received the letter and are there to answer any questions they may have, but it can put the tenant on the spot.
Before sending the rent increase letter, make a copy and keep it for your records.
What To Expect After You Send a Rent Increase Letter
A tenant has three options after receiving a rent increase letter.
The best-case scenario is your tenant agrees to the rent increase and signs the letter and their renewed lease.
If your tenant wants to stay but cannot afford the rent increase, they may make a counteroffer. It’s up to you to decide if you are open to negotiating. It may be worth considering the type of tenant they are. A responsible tenant is better than screening unknown tenants.
Worst-case scenario, your tenant will reject the rent increase and give notice to vacate. At this point, you should send a non-renewal lease notice and list the property for rent to minimize the amount of time the property is vacant.
If you don’t hear back from the tenant within a reasonable timeframe, it’s okay to follow up with an email or another letter.
While raising rent can be stressful, it is necessary for the success of your rental business. Instead of thinking of it as a chance to lose tenants, think about the positives and use this as an opportunity to offer new features, like online rent payments or rent reporting.