Considering a 20% rental increase

[Catherine Maria]

Hi, I recently inherited a 6 unit apartment building that is located in a prime East coast location. Three of the 6 tenants have been there for a long time and the previous owners chose to forgo raising rental fees on a regular basis. Since the building is now under new ownership my real estate attorney informed me that I can increase rental fees above the 3 to 5% norm, for those who are significantly under current market rental rates. One tenant is at least $1K under market and the other two are $700 under market. The state has no limit on rental fee increases; the critera is that the tenant may not consider it unconscionable. The attorney cited an example of a landlord who purchased a property, raised rental fees by 20% and the tenants hired attorneys to contest and the landlord negotiated a lesser increase. Based on thousands of dollars invested in improvements and repairs, I believe I can substantiate a 20% increase. However, I also am concerned about relations with my tenants and want to avoid additional attorney fees to address tenant opposition. I would love to hear others' perspectives. Thanks in advance. 

[Nathan Gesner]

Quote from @Catherine Maria:

1. Know your state laws. Most states do not limit rent increases.

2. Your attorney is full of crap. Tenants can not force you to rent for a particular rate and any attorney would know that.

3. Remove these tenants and start fresh. You want to rent to people that can afford market rate from the start. A significant increase is more likely to result in late payments, animosity, or other issues.

I would tell them you intend to renovate the units and bring them to market rate, so you need them empty. If a tenant insists they can afford the increase, make them submit an application and screen them like you would anyone else.