Looking for a Rent Adjustments Claws to included in my rental contract

4 Replies

Hello Fellow Landlords,

I am in the middle of renting my first house in the US and am in a rush to put my contract together for a prospective tenant.

Currently I am working with the "Strict Rental Agreement" template downloaded from BP (thanks BP) but I want to add a claws that talks about automatic 2% upward Rental Adjustments every year.

I found the following claws but I think it is too complex, I am hopeing to get a plain language example that is currently being used by one of the landlords of this great community.

My Complex claws example:

Rent Adjustments. Commencing on the 1st day of January next following the Rent Commencement Date and on each January 1 thereafter (each such date a Rent Adjustment Date) the Minimum Monthly Rent then in effect shall be increased [or decreased] by a percentage equal to the percentage increase in the CPI Index.

CPI Index shall mean the Consumer Price Index presently designated as the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for all Urban Consumers, U.S. City Average [or for the local region], (Base 1982-1984 equals 100), for the month which is four (4) months prior to the Rent Adjustment Date compared to the Index published for the month which is sixteen (16) months prior to such Rent Adjustment Date. In the event that the statistics are not available or in the event that publication of the Consumer Price Index is modified or discontinued in its entirety, the adjustment provided for herein shall be made on the basis of an index chosen by Landlord as a comparable and recognized index of purchasing power of the United States consumer dollar published by the U.S. Department of Labor or other governmental agency. [Additional clause specifying precisely how the increase is calculated.]

source: http://www.contractstandards.com/document-checklists/lease-agreement-analysis/rent

Thanks for all the help

Luis A. Montanez, MAFM

Goals in writing are dreams with deadlines.” –Napoleon Hill,

“Dreams can inspire you, but goals can change your life.”

Is this a lease or month to month agreement? Most people enter lease so they lock in current rent rates, not to have increases. And with month-to-month you don't need to go into as much detail.

Our month-to-month agreement reads as follows:

Change in terms or rent: The Landlord may update terms or rent for the Premises upon providing the Tenant 30 days written notice preceding the beginning of any month. In the case of an increase in rent, it is understood that all the other provisions of the Agreement shall remain in full force, changed only by the alteration in the amount of rent and not otherwise.

I would read your landlord-tenant law to make sure you don't write an illegal clause, and maybe search for CPI clause or rent increase clause.

The Book says, "The laborer is worthy of his hire."

So are lawyers. Get one. This will cost you maybe a hundred bucks, and could save you thousands.

I don't think I've ever seen a clause like this in a residential lease. Common in long term commercial leases, but I've not seen it for residential.

I would advise against putting a clause such as that in your lease. Find out what the landlord-tenant law for your jurisdiction says about rent increases and stick to it. You can adjust the rent as you see the need by following what you are legally allowed to do. Some of our tenants moved to our properties because their previous landlord was increasing the rent every year. What will your market bear? I raise my rents every few years and my rent raises are not based on the CPI. I tend to raise my rents in $30 increments, which equates to $1 a day more rent that the tenant is paying. The tenants can easily wrap their head around that one. If I do a significant upgrade at turnover, then I raise my rent then too.

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