By Sandra McGee - Starr Partners Merrylands
It sounds simple enough, but it’s also easy to make mistakes. Here are some foolproof tips on how to get rental increases right.
According to the Residential Tenancies Act 2010, there is only one way to increase the rent on a tenanted property. This is to give the tenant 60 days’ written notice, including the details of the new rental amount and the date the rent increases from. You can send the notice before the fixed term ends. However, the start date must be after the end of the fixed term.
Why do we as property managers get it so wrong?
Some common mistakes could include the following:
- Signing a new agreement with the tenant with the new rent amount starting from the day of the agreement, without giving the required 60 days’ notice.
- Ringing the tenant and informing them of the new rent amount and the date for the increase to commence (usually from the next rent period).
- Sending a letter, but not providing 60 days’ notice before the increase.
Why are we still making these errors?
It may be that the landlord wants the increase immediately, and we are too afraid to tell them ‘no’ and that 60 days’ written notice is required. Or we may have failed to send the notice of increase when we were asked to by the landlord, and are afraid to admit our error. Or perhaps the property was sold and the new landlord wanted a rent increase and a new lease in their name. These errors are significant.
Paying the cost
If you are in a CTTT situation, they will ask for copies of the rent increases. If you have continually breached the legislation, they could order that the landlord has to repay to the tenant all rent that has been incorrectly collected. If I was the landlord, I know that if I were ordered to pay the tenant money because my agent had failed to correctly increase the rent, I would be making a claim against the agent for compensation.
We have recently taken over a management from another agent who had not supplied any rent increase letters, yet the rent had been increased at least three times according to the rental ledger. We asked the tenant about the increases over a number of years and he told us that the agent would ring him and tell him how much the rent would increase and that he would pay the new amount from his next payment.
I have calculated the landlord actually owes the tenant $4420 as a result of the invalid notices.
Our first action in this case and others that we have taken over is to stop the landlord’s debt from growing.
How did we stop the landlord’s debt from increasing?
We simply served a correct notice of a rent increase to the tenant. So in 60 days from service of the new notice, the landlord’s debt will not increase any further.
Can you do anything about the other agent’s mistakes? Unfortunately no, but hopefully if you fall into one of the above categories you will now know how to correctly increase the rent.
The other saving grace we now have is the change made in the Residential Tenancies Act 2010 on the CTTT making orders regarding invalid rent increases. If the increase is older than 12 months and has not been disputed in that period, they can count it as being valid (Residential Tenancies Act 2010, section 41).
Serving notice correctly
Don’t forget that any rent increase must be served in the proper manner. If mailing, you also need to be doubly careful when calculating the four working days for postage if you are mailing an increase around the public holidays, particularly Easter and Christmas. During the Christmas period, the post office usually has an extra holiday. Make sure you ring your local post office each year and confirm the dates they are delivering mail – four working days means four working days that the mail is delivered, not four days that you may be working (Residential Tenancies Act 2010, section 223).
This article was first published in the March 2013 edition of the REINSW Real Estate Journal.