by Carolyn Majda

NOV 2013

Staying on top of the average market rents in your area isn’t always easy, but any landlord that doesn’t is essentially waving goodbye to additional profit.

You’ll likely have heard about rents increasing at a startling rate across Australia, and if you’re a landlord or a tenant learning the facts about rent increases helps make sure you aren’t losing money. You might feel like you’re risking pushing tenants out when you raise the rent, but it’s to be expected because of consistent economical changes.

Tenants may feel as though it’s unfair, but the vast majority of properties on the market will have also increased their rent, so it’s unlikely to result in a move. However, if your landlord has raised the rent unfairly, you can take steps to protect yourself.

Why rent increases

The economy is in a constant state of flux. Ultimately, the reason rent increases is supply and demand. For instance, in a picturesque leafy suburb, there is likely to be a high demand for any properties in the area, which allows landlords and letting agencies to increase the rent.

There are so many eager potential tenants that rent can be increased without the risk of vacant properties. Whenever demand exceeds the supply, the supply becomes more valuable, so increased rents can also be expected if there is a limited number of rental properties in a particular area.

Changes to the overall economy or the value of the currency can also impact on rents, so you should monitor local rents each quarter to ensure you stay in line with the competition. If the prices go up you’re missing out on income and if they go down you’ll lose tenants to other landlords offering cheaper rents.

How to raise the rent

It’s much easier to raise your rent without pushing tenants out if you maintain a good relationship with them. If you always perform any required maintenance and respond to any queries or issues, the tenant is more likely to accept the increase.

Ensure you give them the minimum required notice (see below), but preferably you should inform them even sooner. Regular small increases in rent – for example, an additional 4-5 percent once per year (usually above the Consumer Price Index to ensure you stay ahead of inflation) – prevents tenants from being overwhelmed by a significant sudden increase in living expenses and ensures that the landlord is receiving a fair monthly sum for their property.

It also helps if you explain to the tenants why the rent is rising, even if it’s just to bring it in line with others in the area.

Notice periods by State

In all Australian states aside from the Northern Territory, you have to give tenants 60 days written notice prior to increasing the rent. In the NT, this notice is only 30 days. It’s important to note that if this is posted, you have to allow an additional four working days for delivery.

In fixed term agreements, rent increases are only allowed if it was stipulated in the tenancy agreement, and it can never increase more frequently than once every six months.

If you’re buying property interstate this is a reason it’s very useful to have a local agent.

Challenges to rent increases

If your landlord has increased your rent and you don’t agree with the figure, the best approach is to negotiate with him or her directly. Often, you’ll be able to reach a mutually agreeable solution provided that your issues are founded.

This may be because it exceeds the average market rent in your area, or if any services or facilities from your original agreement have also been reduced.

If you’re unable to reach a solution, you can put the matter to your local tribunal (such as the Consumer, Trader and Tenancy Tribunal in NSW or the Victorian Civil and Administrative Tribunal in VIC) for an independent assessment within 30 days of receiving the notice of increase.

You should ensure you have pictures which show the condition of the property, lists of previous repairs and rent increases and proof of similar market rents in your area. If successful, the tribunal may impose a maximum rent for the following 12 months.

Overall, if you increase fairly, regularly and legally, you’re unlikely to encounter any issues from tenants.

How to: raise the monthly rent if you’re a landlord