How to Communicate a Rent Increase to Your Tenants

Although raising the rent is part of the responsibility of being a landlord, the process can often feel daunting. To meet your own financial obligations and keep your tenants happy, there needs to be a bit of a balancing act. If you raise the rent too high, you risk losing good tenants; if the increase is too low, you risk losing out on needed income. Fortunately, a rent increase letter can help you and your tenants navigate the change amicably. 

To help you get started, we’ve created a guide on the best practices for writing a rent increase letter. Please note this is for informational purposes only and isn’t intended as legal advice. Laws may vary based on your location. 

Common Reasons for Raising the Rent

There are a variety of reasons why you might be considering a rent increase:

  • Increased property expenses, such as higher state or local taxes, HOA fees, insurance premiums, or overall cost of living
  • Renovating outdated units
  • Adding amenities to keep your property competitive
  • Adjusting the rent to align with local fair market rates

Keep in mind that although it’s within your legal rights to raise the rent, tenants will be more accepting of the change if you can give them a reasonable explanation for the increase. 

There are also several scenarios where you aren’t allowed to raise the rent, including:

  • Punishment for the tenant’s behavior, such as being late on the rent
  • To force a tenant to move
  • You dislike some quality about the tenant (such as race, religion, or sexuality)

Increasing the rent for any of these reasons is a violation of Fair Housing laws and can put you at risk of legal issues, including accusations of retaliation or discrimination. 

What’s the Purpose of a Rent Increase Letter?

A rent increase letter lets your tenant know that you intend to raise the rent and serves as proof that you followed the legal requirements for the increase. To keep your message consistent across your rental properties and save time, it’s recommended to create a standard rent increase letter that you can use for all your tenants. 

Before writing the rent increase letter, however, there are some important factors to consider:

  • State and/or local laws regarding the increase: Depending on your location, your property may be subject to rent control laws that dictate how much you can increase the rent or specific regulations on the timeline or method of informing your tenant. Do some research on state and local laws or consult with an attorney. 
  • Effective date of the rent increase: Regardless of where your property is located in the U.S., you’re only allowed to increase the rent at the end of a lease’s term. In the case of a month-to-month lease, the rent can be raised for the subsequent month (typically with a 30-day advance notice). For a fixed-term lease, adjustments can be made at the beginning of a renewed lease. 
  • Local market rates: When determining how much to increase the rent, it’s important to keep the rate competitive for the sake of tenant retention. Do some research on similar rentals in the areas or look at the local rent data to get an idea of what other landlords are charging. 
  • Typical rent increase: The standard rent increase is around 3-5% annually. However, you should also factor in population growth, employment opportunities, or revitalization initiatives in the area. 
  • Security deposits: If you base the amount of the security deposit on the monthly rental rate, don’t forget to collect the additional money to cover it. 

Tips for Writing the Rent Increase Letter

After you’ve done your research and considered the above factors, it’s time to write your rent increase letter. Make sure to keep the tone friendly, but be clear and straightforward about the increase. You should also include the following information:

  • Your name and contact information
  • The date you drafted the letter
  • A greeting that includes the tenant’s name
  • The address of the property
  • The date the original lease was signed 
  • The date the original lease will end
  • The amount of the current rent payment
  • The amount of the new rent payment
  • A brief explanation of why the increase is necessary or the benefits they’ll receive due to the increase (such as improvements to the property)
  • The date the new rent rate takes effect
  • The notice date if the tenant doesn’t want to renew the lease
  • Your signature and the date you signed the letter
  • A place for the tenant to sign and date the letter to show they received notification of the rent increase 

You may also want to include a lease renewal along with the letter to streamline the renewal process. 

Sending the Letter

The required notification period varies based on specific state regulations and the type of lease agreement you have in place. Typically, for month-to-month tenants, a 30-day notice is customary before implementing a rent increase. In the case of fixed-term tenancies, the general guideline entails a notice window of 30-60 days.

You should also take into account the lease’s stipulated notice-to-vacate policy. If your lease states there’s a 30-day advance notice of a tenant’s intention to move out, it’s advisable to send the rent increase letter 30 days prior to that point. Failing to inform a tenant about a rent increase within their notice-to-vacate deadline may potentially cause issues, especially if they’re subject to a late notification fee. 

When you’re ready to deliver the letter, you have three options: certified mail, in-person, or by email. While all of these options work, certified mail is generally the best method—and it may even be required by your jurisdiction. If you choose to send the letter by email, be sure to include a read receipt so you know your tenant received it. You should also make a copy of the letter to keep in your records. 

After receiving the letter, your tenant can:

  • Agree to the new rental rate and renew their lease
  • Present a counteroffer to negotiate the new rent amount
  • Decline the rent increase and inform you of their notice to vacate

If you don’t receive a response from your tenant within a reasonable timeframe, make sure to follow up with them. 

Although the act of raising rent can be a source of stress, it’s crucial for your rental venture. Rather than viewing it solely as the possibility of losing your tenant, consider the positives. You can use this opportunity to introduce new offerings and enhance the overall tenant experience!

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