As agents for the owner, property managers can find and screen tenants, handle administrative paperwork, collect rent, and take care of maintenance and upkeep. Companies like Select Leasing & Management in St. Louis have the know-how and manpower to handle all of the day-to-day tasks for landlords who either can’t—or don’t want—to do it themselves.
Owners delegate certain rights when they hire a property management company. One right that we discussed in a previous post is the ability to start eviction proceedings. Managers, even if they’re not on-site, are in a position to know when eviction actions are necessary.
Another task that makes sense to delegate is raising the rent. In many cases, property managers have the authority to research market rates and raise tenant rent amounts accordingly.
Guidelines for Raising Rent
While property management companies can raise the rent, they can’t do it without the landlord’s knowledge and permission. But it is technically possible for them to include wording in their contracts that gives them the authority to do so. When finding a company to manage rental properties, owners must read the terms of the agreement carefully to make sure an unscrupulous manager isn’t able to raise rents without the landlord’s knowledge (and maybe even pocket the extra profit for themselves!).
In most cases, raising rent will either be initiated by the landlord or suggested by the management company. Either way, both parties will be aware and in agreement about the amount and timing of the increase.
Whenever a rent increase is put in place, it must follow state and local laws and regulations. Although St. Louis isn’t one of them, some areas of the country have rent control laws where very strict rules exist about when rent can go up and by how much.
More typical are laws about how much notice tenants should have. For month-to-month leases, renters must be given 30 days notice of a rent increase. When there is a fixed-time lease in place, rent can’t be raised until the lease is up for renewal.
Management companies also have the right to increase the amount of a security deposit. For example, if the rent is $1000 a month and there is a deposit in place for two-months’ worth ($2000), when rent goes up to $1100, an additional $200 can be billed to get the security deposit up to $2200.
Good and Bad Reasons to Raise the Rent
It seems obvious that when a landlord’s costs go up, so should the rent. But expenses should only be part of the equation. The most important factor in deciding on a rent increase is the local market. Owners and property managers must strike a balance between paying the bills and keeping rents in line with other comparable properties in the area.
Tenants may question the need for an increase, especially if they think it’s excessive. Higher utility costs, insurance, or taxes may be impacting the entire local market. If you are keeping pace with other buildings in the area, tenants will often find that moving will not necessarily get them a better deal.
Sharing the reasons for a raise in rent can help renters understand and accept the change. If the property is undergoing renovations and upgrades, or adding new amenities, tenants might be more accepting of an increase. There is no guarantee that every tenant will stay, but it helps to be open and honest about the costs of keeping the property a desirable place to live.
Landlords who steadily raise rents without maintaining the building should beware. Tenants are sure to become frustrated with apartments where things don’t get fixed but the price keeps going up. If renters are leaving, it could be time to hire a property management company to improve upkeep, or find a new one.
And remember: Raising the rent to force certain tenants out is unacceptable, and may be illegal.
It should never be done to discriminate or retaliate against tenants in any way.
Keeping Tenants Happy When Rents Go Up
No renter likes to hear that their rent is going up. But it can go smoothly if the property manager handles it properly. Here are some tips to make it easier for everyone:
- Put the rent increase in writing.
In some places, this is required by law, but even if it’s not, it’s a good practice to follow. Receiving written notice will avoid misunderstandings or claims that the renter didn’t know about the change.
- Give plenty of notice.
Even though the law may only require 30 days for month-to-month renters, try giving 60 or 90 days. Renters will appreciate the heads up so they can adjust their budgets for the new expense. If they decide to move out it gives them a head start on their apartment search.
- Remind tenants about payment options.
If renters use automatic payments, prompt them to contact their bank about the change. Whether the bank sends the wrong amount, or a tenant sends a check with the old amount out of habit, it is up to the property manager to chase down the balance due. Reminders can reduce the need for that extra chore.
- Opt for gradual increases.
Tenants are more likely to accept a 2% increase each year, rather than paying a steady amount for five years and suddenly having a 10% jump.
Most tenants understand that as prices increase all around them, so will the cost of their rental property. When property managers have to raise the rent, it is best to do it in a straightforward, honest way. When the renter feels that the amount is reasonable and that their home is being well cared for, they will be much more likely to stay.
