Property Management: Are Rent Increases Legal?
Landlords cannot simply increase the rent because the market has moved. The Residential Tenancies Acts in each State and Territory encompass strict legislation that needs to be adhered to or landlords can face hefty penalties.
The Acts basically state that if your tenants are on a fixed-term lease agreement the rent cannot be increased unless a legally compliant rent review clause is written into the lease agreement. If the clause is in place, the tenant needs to be given usually 60 days notice. The rise cannot usually occur within 6 months of the tenant moving into the property or be increased within a 6 month period of a previous rent increase.
If your tenants are on a periodic lease agreement, the rent may be increased but the above conditions also apply.
We ensure that rent reviews are a standard clause in our tenancy agreements allowing flexibility for owners should the rental market shift. Rent review clauses are not standard in most leases and self-managers should be particularly careful in ensuring that the clauses they insert are legally compliant and excercised in accordance with the relevant States Act.
Under-renting properties is also an issue for property investors. We see many examples of this when we take on new property managements where properties are grossly under-rented by $100 per week or more, including one that was being rented at half of its market value. The property was tenanted by the same tenants for 3 years who never received a rent increase during that time despite the property being under professional management, the market shifting, and the tenants being on a periodic lease agreement.
Unfortunately we have seen this situation many times. Some property managers have too many properties on their books to give individual properties the attention they deserve. Many property managers don’t own a property let alone an investment property and can fail to understand the needs of investors. This situation can also occur in self-managed properties. Owners can become ‘emotionally involved’ and don’t want to offend or risk losing their tenants if they increase the rent.
As a result of these situations properties may be under-rented leaving owners with a loss in income. Make sure you are dealing with a property management firm who keeps their average portfolio per property manager low so your property manager can keep up to date with market rents and maximise your return.
more articles here