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Notice of rent increase - Raising the Rent – how and when can you do it?

Raising the Rent – how and when can you do it?

Now that COVID is under control, and we’re allowed to walk in and out of public places mask-less,  socialize with anyone we want, and the economy’s improving- thoughts for landlords turn to raising the rent. Although there are no laws in Alberta restricting rental increases–how and when you raise the rent follows strict guidelines.

Before raising the rent, go back to the RTA (yes, I know, I sound like a broken record) and check the lease. Did your tenants sign a fixed-term lease or a periodic-term lease?

Raising the rent for fixed-term leases

In Alberta, if your tenants signed a fixed-term lease and you are re-renting to the same tenants whose lease has ended, you can raise the rent by any amount. But only on the new fixed-term lease. You can’t raise the rent during a fixed-term lease. You also can’t raise the rent during a fixed-term lease if you sell the property to another landlord. If the new landlord buys your property during the tenant’s fixed-term lease, they must honour the fixed-term lease. If the new landlord wants to raise the rent, they must follow the time frames stipulated in the RTA for fixed-term leases.

Raising the rent for periodic-term leases

If your tenants signed a periodic lease, after 365 days have passed since the last rent increase or since the tenant moved in, then and only then can you raise the rent.

When giving notice of a rental increase, you must include:

  • The tenant’s name and address
  • Identification of the property (address)
  • New rental rate
  • Effective date
  • Date of notice
  • Landlord/agent’s name, address, phone number
  • Landlord/agent’s signature

Of course, with all important documentation, be sure your tenant has a copy and that you keep a copy in your file for three years (yes, I know, I still sound like a broken record).

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Then there’s the question of how to broach the topic of raising the rent with your existing tenants. Since we all know that no one looks forward to paying more rent, it’s normal to dread the response. However, there are ways to frame it in a palatable way.

Do you want your tenants to stay?

Write a clause into your rental lease agreement stipulating that the rental rate will increase at a rate of X% per year to accommodate inflation. Including it in your lease bypasses the need to do yearly calculations or to summon up your courage and diplomacy for the rental increase notification.

If you have not written an automatic yearly rental increase into your lease agreement:

  1. Do your market research for comparable properties in your area
  2. Determine why you should raise the rent. Do you have higher utility costs, property taxes, mortgage rates, insurance premiums, property manager rates, maintenance?
  3. Adjust 3-5% per year – or at a reasonable rate that keeps up with inflation

Once you’ve done your research, reach out to your tenant 30-90 days before the lease expires. Inform them your research indicates properties in your area rent for x amount, and although you could raise the rent to x amount, you won’t because you value them as tenants, so you are only raising the rent to x dollars (slightly below market rates). As an additional incentive,  if they renew 60 days before the end of their lease, their rate is 3% (or whatever rate you choose. However, it will be 5% if they wait until the last minute to renew.

Most tenants aren’t happy about paying more for rent, but if there is a marginal rental increase and they like the property and you, they’ll stay put. Moving is more of a hassle than paying an additional $20 a month to stay.

Do you want your tenants to leave?

On the other hand, if you have tenants you don’t want to keep, raising rent by a crazy amount is a method many Alberta landlords use to motivate them to leave.

If you’re raising the rent, check your lease term, decide whether you want your tenants to stay or leave and work out the numbers from comparatives and your expenses, craft your message, and you’re good to go.

Do you have rent-raising tips you’d like to share with me? I’d love to hear about them [email protected]

Do you like these tips? There are plenty more you can take advantage of plus there are tools and educational resources for DIY landlords; sign up for a membership for Landlord Fundamentals 101. To turbocharge your learning and landlording efficiency, combine Landlord Fundamentals 101 with one-on-one coaching to qualify for the Canada Alberta Job Grant.

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