How to Raise the Rent Without Losing Tenants

How to Raise the Rent Without Losing Tenant

Robert S. Griswold | Steven R. Kellman | Ted Smith
14-May-2000 Sunday

This column on issues confronting renters and landlords is written by Counselor of Real Estate and Certified Property Manager Robert Griswold, host of Real Estate Today! with Robert Griswold (10 a.m. Saturdays on AM1130 - KSDO radio, or on the Internet at www.retodayradio.com), and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: I've got a tenant who has given me no problems, but I know I can get more than $1,300 for the house he's renting. How do I raise his rent without losing his business?

A: Griswold -- The best way to handle rent increases is to be straightforward. Before actually sending a notice of increased rent, find a rental rate market survey for comparable properties in your area. Once you determine what the current market rent could be for your unit, decide if you are willing to give your tenant a slight discount in exchange for continued tenancy.

I often recommend the new rent be set at $10 to $25 below current market rent level. Thus, you might consider a rent increase to $1,275 instead of the full market rental rate of $1,300 per month.

Share the survey information with your tenant. No one likes to pay more for anything but if you are staying within the rental market price range for your unit you are being fair.

You could also stay with a month-to-month rental agreement and send your
tenant a letter indicating you will not raise the rent again for a set period of time. This gives your tenant the reassurance that they can plan their personal budget with some certainty.

Contact your tenant and ask them if there are any items in need of repair. Remember that you must always maintain the habitability of your rental unit but you are not required to address merely cosmetic items. However, it is often a good idea to see if there are any cosmetic items or even unit upgrades that you could do to show your appreciation for the tenant's continued tenancy.

Shocking deposits

Q: I am a senior citizen who needed to move recently. I was shocked by the large security deposits required. One apartment rented for $550, but they wanted a $650 security deposit. This seems outrageous, especially since they are not offering interest.

I heard that back East landlords had to pay interest on security deposits. What are the laws about the amount legally acceptable for security deposits and can I demand interest on my money?

A: Smith -- There is nothing illegal or even outrageous about asking for a security deposit of $650 when rent is $550. California law allows a maximum security deposit equaling two times the monthly rent -- here, $1,100.

Thus, it is my experience that $650 is reasonable based on the amount of rent. Rental property refurbishing costs -- both materials and labor -- are constantly increasing. For even average amounts of cleaning and repair, $650 may not go very far.

And, for conventional tenancies, California landlords are not required to pay interest on residential security deposits. You may not demand interest on your deposit.

Kellman -- Ted correctly points out that a landlord can charge two times the monthly rent for a security deposit. Even worse, in a furnished unit, they can charge a deposit equal to three times the rent.

While state law does not require interest to be paid on deposits, some cities including Berkeley, Cotati, East Palo Alto, Hayward, Los Angeles, San Francisco, Santa Cruz, Santa Monica, Watsonville and West Hollywood do require deposit interest to be paid to tenants.

San Diego does not have such a law. Therefore you may ask that interest be paid on the deposit but most landlords in San Diego will not even consider it.

Landlords are entitled to charge a deposit to provide security against rent default, cleaning or damage charges. Perhaps you can demonstrate to the landlord that you are a low risk for such charges with references from past
landlords. Absent the landlord's cooperation, you may be forced to pay that deposit or keep on looking.

Sign on the dotted line

Q: My current lease still has about two weeks to go, but last week my landlord gave me a lease renewal to sign. I hadn't even had a chance to look at it, but now the landlord has left a message on my voice mail that he has changed his mind about the terms and wants to raise the rent $50. He has signed the lease. Didn't he accept the terms by signing the lease?

A: Griswold -- The lease is not valid and binding on either party until you
sign it. So even though he has signed it, he can still communicate in writing to you that he is withdrawing the offer. In other words, he can back out if you have not formally accepted.

Obviously, the fact that you have a copy signed by him is not relevant if he sends you written, not verbal, notice voiding the lease prior to your acceptance and your delivering that fully signed lease back to him.

Thus, the lesson to be learned from this experience is don't wait any longer than necessary if you really want to stay.

Smith -- I'm afraid that you missed your golden opportunity to bind the landlord to the proposed lease. When he sent you the already signed lease,
California law would construe this as his offer to you to renew the lease at the old rate.

At that moment in time, you had your chance to sign the lease and accept his offer to renew. When he presented the lease, you didn't sign it. He took the lease back. The offer to renew was withdrawn.

Now, you'll need to consent to his demand to pay a higher amount. Otherwise, you'll have to vacate. There is no California law automatically
renewing your lease. Most likely, it will convert or "roll over" into a month-to-month tenancy, each party having the right to serve a 30-day notice of termination.

Kellman -- You may not have missed your opportunity to get that lease. In California, some contracts may be made verbally. When there is a disagreement over the terms in a contract, a written document will usually prevail over a verbal communication.

Here, you have a written offer to renew the lease signed by the landlord. It is reasonable to rely on that existing written lease renewal offer since there is no subsequent written document which alters or cancels that offer to lease.

Maybe your landlord's voice mail was not a serious attempt to "withdraw" the offer, but was merely a tactic to pressure you to quickly sign the lease. All you received so far was a voice mail message which may not be a legally binding event. Therefore, if you want the lease at the originally stated rent rate, you should promptly sign the lease and deliver it to the landlord, keeping a copy for yourself.

Once that is done, the presumption should be that you have a binding lease. Your landlord may then have a real uphill battle to prove otherwise.

IF YOU'RE A TENANT OR LANDLORD, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 120191, San Diego, CA, 92112-0191. Or you may e-mail them at rgriswold.sdut@retodayradio.com

Copyright Union-Tribune Publishing Co.

Back to 2000 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

FHEO Logo

Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com