How to increase rent DURING lease term?

Question

Hi everyone,I purchased a property where the rents are insanely below fair market rate ( 40-50% lower). One lease is up in a month so I don't have an issue there, however, the other side's lease will be active for almost a year, it was recently renewed. I was wondering if there is a creative (and legal) way to increase the rent to a more reasonable rate. After researching it, someone recommended to offer the tenant to raise it to 75%-ish of the market rate and lock them in for another 6 months or a year after their initial lease would end. Do you all have other ideas how it can be done, that's appealing to the tenant as well? I would prefer to keep the tenants, but the current rent just doesn't make sense financially.

Nathan Gesner · Answer

You can't change the terms of an existing lease without all parties agreeing. Your tenant is not going to agree to a 40% increase.

I recommend you notify them right now that you intend to terminate their lease when it expires. Offer them the opportunity to move out at any time with just 15 days notice and tell them they will get their deposit back as long as they haven't damaged anything. They may start looking for a new rental and take you up on your offer, then you can terminate the lease, clean it up, and rent it at market rate.

Jonathan R McLaughlin · Answer

@Mark Csongradi treading on thin ice here, mutual agreement can easily look like coercion which is a no no. A lease is a contract and the best, simplest and legal way is to wait until the contract expires and so a new one. Patience.

Chris Seveney · Answer

@Mark Csongradi

Any modifications would need to be agreed too by both parties. I wouldn’t try and extend them on new terms etc at a discounted rate, I would just let it ride for the year then bring it up to market rent

Theresa Harris · Answer

Find out how much notice you need to give the first tenant before increasing the rent.  for tenant number 2, see if there are renos they want done (and you want to do) that they might let you do in exchange for increased rent.

Theresa Harris · Answer

Check your local rules.  In some cases if you don't give notice, the lease converts to month to month under the same terms.

Mark Csongradi · Answer

Theresa,That's a great idea, I'll consider it when time comes. Regarding the first tenant, do I still need to give a notice even if their lease expires?

Ben Kagel · Answer

You and the tenant would have to mutually agree to modify the terms of the existing lease, so you’d have to give the tenant something of value in exchange for paying higher rent. The tenant can reject your offer and keep the current lease in place. I’m not sure what you could offer that would be enticing enough for a tenant to agree to pay higher rent. If the tenant is paying on time and not causing problems, it might not be worth disturbing the existing lease. Better off waiting until it expires.

Garrett Swan · Answer

Hi Mark,

To my knowledge i believe you need to honor the current lease agreement as you inherited the tenant.  You could always do a rent addendum if the tenant agrees to pay more but that could be challenging trying to convince them as they already signed on an agreed amount for the year.

best of luck,

Garrett

How to increase rent DURING lease term?

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