How to handle rent increases as a property manager

One of the roles of a property manager is to review property rents and provide information about current market value to your client. As a property manager, you will have access to information that may suggest your lessor should increase the rent, or they might come to you with a request to increase.

Regardless of what has led to the rent increase, there are two major pitfalls to navigate when handling it: the legal and the interpersonal.

The law

From 6 June 2024, rent cannot be increased within 12 months of the date the rent was last increased for the property.

This requirement applies regardless of whether there is a change of tenant or owner in the relevant 12-month period and applies to both a fixed term and periodic agreement.

Rent can be increased during a fixed term agreement provided the following criteria is met: -

• a special term is included in tenancy agreement, stating when the rent would increase and the amount of the increase or how this is to be worked out;
• a minimum of two months' written notice is provided before the date of the rent increase; and
• the increase does not commence sooner than 12 months from the date of the last rent increase for the property, regardless of whether there has been a change of tenant or owner within this period.

Note: If rent is to be increased during the tenancy agreement, written notice to advise of an increase can only be issued once the agreement has started.  This means the earliest a rent increase can take place is two months from the commencement of the agreement (assuming the required written notice was issued the day the agreement started)

For periodic tenancies, the rent can be increased with a minimum of two months' written notice. The notice could be given to the tenant at any time, but the rent increase cannot commence sooner than 12 months after the last increase at the property.

If the rent increase is due to fall in line with a new agreement commonly known as renewal, there is no requirement to provide two months' notice as long as the new agreement with the higher rent is signed before the expiry of the current agreement. Best practice is to give the tenant as much notice as possible. However, if the tenant signs the new tenancy agreement, then whatever rent is stated in Item 7 will be payable from whatever date is stated in Item 6.2, even if that is immediate. Obviously, assuming it has been 12 months after the last increase at the property.

If it has been at least 11 months since the last rent increase (or the start of the tenancy), the bond may increase with it. The tenant must pay the bond difference by the date stated on the rental increase notice, which must be at least one month after the date the tenant received the notice. Any extra bond must be lodged with the RTA and be no more than the equivalent to four weeks rent regardless of the weekly rental amount.

If the tenant wishes to dispute the increase, they can apply to QCAT for a judgment. When making its decision, QCAT will take into account the following considerations, as well as anything else it may consider relevant:

• rent of typical nearby properties
• difference between proposed and current rent
• condition of the property tenancy term, and
• period since last rental increase

The relationship with the tenant

For property managers, the ideal scenario is a rent roll full of reliable long-term tenants, maintaining a positive relationship with tenants is a crucial factor in achieving this.  When increasing rent on any property, it is important to approach the issue openly and honestly with your tenant, don't let them discover the change only when reading the new lease agreement.

You must provide at least two months' notice, but if you know you will be increasing the rent before then, let your tenant know as soon as possible. They will appreciate the extra notice, and it should make them more likely to accept the increase, saving you the time and effort of finding new tenants.

Tenants may feel that the rent increase is excessive or unjustified. If they broach this issue with you, it is important to not be dismissive.  Listen to the tenant's reasoning, be receptive to any requests or suggestions and remember it is ultimately the owner’s decision.  Owner’s may feel negotiating on an increase to retain “good” tenants is often a more favourable outcome than risking the unknown of securing new tenants at a higher rate or incur the associated costs with vacancy and reletting.

Ultimately, the most important part of handling a rent increase is ensuring you are acting within the law, and maintaining best practice principles. Anything you can do to maintain a positive rapport with your tenant is a bonus, and not one that should be overlooked.

Follow the rules and do your best to keep all parties happy, and life as a property manager will be that much easier for it.

For further information, visit https://www.rta.qld.gov.au/Renting/During-a-tenancy/Rent-and-other-bills/Rent-increases

Important disclaimer: This article is provided for general information only, and the author is not engaged to render professional advice or services through this article. Readers should satisfy themselves as to the correctness, relevance, and applicability of any of the above content, and should not act on any of it in respect of any specific problem or generally without first obtaining their own independent professional legal advice.

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