I’m Looking For The Legal Limits When Raising The Rent..
We provide here a few questions that have been posted in the Community Forums and our answers to them.
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Q1
I’m looking for the legal limits when raising the rent on lease renewal and anything specific on that issue within the state of AZ.
A1
Except for properties subject to rent control or rent stabilization laws or otherwise restricted (e.g., Section 8 or other type of subsidized housing) or otherwise specified in the lease agreement, one can raise the rent by any amount desired.
In general, one cannot raise the rent during the term of a lease unless allowed by the lease agreement or agreed to by the tenant. For month-to-month leases, most states require 30 days advance notice and that is the period for AZ. However, a longer notice period can be specified in the lease. Whether a month-to-month tenancy or the end of a long-term tenancy, it is best to give notice of a rent increase somewhat more than the minimum required by law in order to avoid arguments regarding whether or not the minimum notice requirement was met. As with most things related to landlording, it is best that all such notices be in writing
Unless otherwise specified in the lease agreement, an increase need not be effective on the 1st of the month or on the day of the month that the current lease expires – you would simply pro-rate accordingly. A lease clause specifying the rent upon renewal or extension is binding on both parties. In general, the landlord is not required to offer renewal or extension of a lease unless the lease states otherwise. If the lease will not be renewed or extended, it is best to provide notice of such plans well in advance of the termination of the current term, preferably more than the 30 days usually required. It is best to not give reasons for not extending or renewing, particularly any reason that could be somehow interpreted as a violation of fair housing laws.
When considering whether to raise the rent for existing tenants, whether for extension or renewal of a long-term lease or with proper notice for a month-to-month tenant, there really can be no specific criteria, but there are some basic principles.
For a tenant that a landlord would like to retain, the most basic thing that must be considered is what amount of increase would motivate the tenant to move. Vacancies are costly for a landlord – with zero-rent downtime, repairs and redecorating, utilities, advertising expense, and a lot of time required of the landlord and/or manager. It would require that a replacement tenant remain for over 2.5 years in order to make up for a one month vacancy on a $900/month unit, with preparation costs of $600, if the new rent were $50/month higher. The time spent on the vacancy and the possibility of major expenses related to correcting just normal wear and tear can make the event even less attractive.
Tenants will usually not leave over a reasonable increase that still leaves the rent slightly under market because moving is costly in a number of ways. It is better to give regular annual small increases rather than large occasional ones.
The decision for a specific case must be based on a number of factors, including the condition of the unit, local market conditions, the current rent compared to market, and the known history of the existing tenant compared to the uncertainty of the next one.
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Q2
Why does my commercial lease contract – for a business that occupied the space when I bought the building – read “minimum monthly rent” $2500. Why does it say minimum?
A2
A typical commercial lease agreement is much more complex than a typical residential lease agreement and what is legal for commercial leases is not nearly as regulated as for residential. There may be no reason for it to say “minimum” other than whoever wrote the clause wanted to use that term. There may also be an important reason to have used the term because of one or more other clauses, particularly clauses related to options to renew or extend and to cost of living adjustments. Without reading the entire lease there is no way for me to know whether there is any real reason. Practically speaking, unless there are clauses such as previously mentioned, I do not think it matters whether the word minimum is used or not. In either case, the monthly rent would be the same and that amount would be the minimum amount payable. Absent some unknown other clause, it would also be the maximum rent payable until the existing lease term expires.
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Q3
Our tenant has not paid rent for 3 months, we have asked him to move out and he is taking his time. The house is dirty and there is still stuff there. We have already filed for eviction once. What can we get if we file a complaint in court for abandonment of the property and not paying rent? Is it worth it to go to court and spend a lot of money, do we have right to enter their house and throw away his stuff? Please help. Thanks.
A3
Until the tenant gives up possession, you have NO right to enter a tenant’s unit except for purposes allowed by law and in accordance with the notification period required by the law of your state (except for a bona fide emergency). You have NO right to touch his stuff unless you have good reason to believe that he has purposely abandoned the stuff.
Some states’ laws include specific procedures that must be followed in order to consider that a tenant has abandoned the premises and lost the right to possession. Such laws enable the landlord who follows the procedures to safety take possession of the unit even though the tenant has not demonstrated intent to terminate tenancy. Absent such defined procedures and absent specific things that would otherwise be certain to satisfy a court regarding evidence of abandonment, landlords must proceed carefully.
Even then, you must follow any abandoned property laws of your state in order to minimize risks, laws which vary significantly among the states. A few states allow landlords to dispose of abandoned property in any way they see fit. Some states have very complicated requirements regarding abandoned property including that it must be stored in a secured manner, notice of the matter being provided to the ex-tenant as required by the state law, notice of a public sale of the property published in the manner required by state law, and the proceeds of the sale must be applied against amounts legally owed the landlord, with any balance being paid to the ex-tenant. The laws of other states fall somewhere between those two extremes. Failure to follow abandoned property laws can result in lawsuits in which the ex-tenant may claim that his property included jewelry, antiques, or other valuable items.
You state that you filed for eviction once. However, you do not say why the tenant is still in the property. Did you actually process an eviction through the court or only serve a notice? Did you not follow through with the process, win a judgment, and have the tenant legally removed via the proper officer of the court? In many states, completing an eviction can simplify the personal property abandonment issue.
For future reference, I recommend that a “pay or quit” notice be immediately served on a tenant the day after the rent was due (including any grace period required by state law or the lease agreement) and, if the rent is not received within the notice period required by state law, immediately start the eviction through the court. It is sometimes a good idea to proceed to completion of the eviction even when the tenant leaves voluntarily after being served with the complaint and summons. Whether the extra cost of completion is cost effective depends on issues beyond the scope of this reply.
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Additional Information
Most of the issues discussed in these Q&A’s are covered in considerably more detail in our eCourses and/or in our Mini Training Guides.