Sending a Rent Increase Letter to Your Tenant: What is Acceptable?

Rent increases are a common source of stress for Landlords and Tenants. Landlords need to periodically increase rent to keep up with rising costs and market rates. That said, Landlords must handle rent increases correctly to ensure legal compliance and maintain strong Landlord-Tenant relationships. 

Before issuing a rent increase letter, property managers and Landlords need to be familiar with state Tenant rights and Landlord rights. It’s also helpful to implement rent increase best practices to increase Tenant retention and satisfaction. 

Here is a guide to help you write a rent increase letter that your tenants will accept. You can also visit ezLandlordForms.com to customize a legally compliant Increase in Rent Notice. 

What Is a Rent Increase Letter? 

A rent increase letter is an official notice from a Landlord or property manager to a Tenant. The purpose of the letter is to provide a current Tenant with information about an upcoming rent increase. 

A letter to increase rent: 

• Provides Tenants with written notice of an upcoming rent increase – usually 30-60 days
• Communicates details of the rent increase, including the amount and date of implementation
• Documents compliance with local and state notice requirements for increasing rent
• Provides Tenants with an opportunity to accept the new rent price or issue a non-renewal notice 

Increase in rent notice letters are a must if you plan to increase rent. They ensure good Landlord-Tenant communication and legal compliance. 

When Should You Send a Rent Increase Letter? 

In most cases, the rental agreement specifies that rent cannot be increased during the Lease term. While some rental contracts provide requirements for increasing rent or include an automatic rent increase, most do not. 

The general practice is for Landlords to increase rent at the end of the Lease term when it’s time for a Tenant to renew the rental agreement. It’s also common to issue notices to increase rent when a Tenant is on a month-to-month lease agreement. 

Landlords should issue an increase in rent notice: 

• At the end of the Lease term, when a Tenant is going to renew the Lease Agreement 
• If the Tenant has a month-to-month rental agreement and the rent is below market rates 

Determining the exact timing for rent increase letters depends on your state’s Lease laws. Most states have specific requirements about the notice that a Tenant must receive before a rent increase. It is generally 30-60 days. 

While it’s vital to check local and state requirements, the most common notice periods are: 

• 30 days for month-to-month Lease Agreements
• 30 to 60 days for long-term rental contracts that are coming to the end of the Lease term

Some Landlords include automatic rent increases in the Lease Agreement. These clauses usually provide for a 3-5% annual rent increase. You do not need to issue an increase in rent notice if: 

• Your rental contract clearly states that there’s an annual rent increase
• The Lease includes the amount of the increase and the date of implementation
• The rent increase clause complies with all state and local rent cap laws

What Are the Legal Requirements for Rent Increase Notices? 

Your rent increase letter must comply with all applicable notice requirements and rent control laws. In addition, it should include: 

• The Landlord’s name and contact information 
• The names of all Tenants
• The property address
• The proposed new rent amount 
• When the rent increase will go into effect
• The date by which the Tenant must accept the increase in rent
• The date by which the Tenant must issue a non-renewal notice 
• The Landlord’s signature
• The date the notice was sent to the Tenant 

State Laws on Notice Periods and Rent Increases 

Most states have notice period requirements for increasing rent. These range from 15 days to 90 days. 

In addition, some states have limitations on how much a Landlord can raise rent. Rent increase laws, or rent control laws, provide specific limits for annual rent increases. 

Here’s a snapshot of states impacted by rent cap laws: 

Landlords should review state and local rent increase laws before issuing a notice to ensure legal compliance. 

Common Mistakes Landlords Make With Rent Increase Letters

Making a mistake with a rent increase notice can lead to: 

• Losing a quality Tenant
• Legal issues and lawsuits 
• Confusion between Landlords and Tenants 
• Negative impacts on Landlord and Tenant relationships
• Decreased rental income

Because of this, Landlords want to comply with all legal and procedural requirements when issuing a notice to increase rent. Some of the most common mistakes by Landlords are: 

• Inadequate written notice of the rent increase
• Failure to comply with the Lease terms regarding rent increases
• Violating rental cap laws
• Increasing rent too much and not staying competitive with market rates 
• Unclear notice letters that allow for ambiguity about the rent increase or next steps
• Inadequate delivery and failure to document the Tenant’s receipt of the notice 

The best way to avoid these mistakes is to use a legally compliant rent increase template. In addition, it’s always best practice to review state and local rent increase laws. If you have any questions or concerns, consult with a local lawyer familiar with rental laws. 

How Much Rent Increase Is Considered Fair or Acceptable? 

Calculating the amount of a rent increase can be complicated. Landlords want to increase rent to keep up with market rates and rising expenses. However, you don’t want to increase rent so much that you lose a quality Tenant. 

Factors to consider when calculating a rent increase are: 

• Annual increases in the cost of living
• Changes to property tax rates
• Increased maintenance costs 
• Property improvements or upgrades
• Changes to the neighborhood and comparable rental rates

As a general rule, Landlords should increase rent between 3% and 5% annually. However, Landlords should review comparable rental units and rates to help determine fair market rent. 

When calculating a rent increase, keep in mind the cost associated with a vacancy and turning over a unit. If you have a quality Tenant who takes care of your property and pays rent on time, it’s a good idea to be conservative with rent increases. 

Rent Increase Compliance Checklist 

Good systems and procedures can help Landlords efficiently create increase in rent notices that are legally compliant. Here’s a checklist to help guide you through the process: 

• Review state and local notice requirements
• Review applicable rent increase laws
• Review the terms of your Lease Agreement 
• Customize a rent increase letter with all required details
• Ensure timely delivery to the Tenant and document the Tenant’s receipt of the notice 
• Get documentation of the Tenant’s acceptance of the rental increase or non-renewal 
• Keep documentation of all rent increase notices and Lease Renewal Agreements 
• Timely implement the rent increase and document receipt of the new payment. Electronic rent payment systems make it easy to issue a new rental bill and document the Tenant’s payment of the updated rent amount. 

Customize an Increase in Rent Notice 

Landlords need to comply with rental laws when issuing an increase in rent notice. That said, the process doesn’t have to be stressful or time-consuming. 

Use our increase in rent notice template to create a customized increase in rent letter that provides your Tenant with adequate notice, information, and documentation of an upcoming rent adjustment. 

Create an account today to customize an Increase in Rent Notice in minutes.