Is it legal to add a rent increase clause to the lease agreement?

Question

I know Oakland has some seriously tough tenant laws. As far as I know the max rent increase at the moment is around 1% per year, which is a joke. I wonder though if it is legal to add potential future rent increases in the rental agreement. Something along the line "The landlord has the right to increase the rent by no more than 10% per year". That does not mean I would increase it by that much every year, but it would at least enable me to do so.

Something tells me that this would not be legal though. Am I right with that assumption? Are there any loopholes or workarounds that would accomplish the same?

Simon

Something tells me that this would not be legal though. Am I right with that assumption? Are there any loopholes or workarounds that would accomplish the same?

Simon

Brian Garlington · Answer

@Simon Stahl

This year the rent increase is 2%........:-)

A couple of creative ways to increase your cashflow in Oakland or any rent control area after the first year would be.....

1. In the initial lease lease you include an alarm system and monitoring......I bought a used one from SimplySafe and for the first year only I paid the $24.99/mo monitoring......

2. In a duplex I own I get Cable and or the first year I told the tenant it is being provided at no extra charge.....the box itself is only an extra $10.00 per month.

At the end of the first year those are not being provided anymore,....but if the tenant still wants them then they pay an extra $35.00 per month on top of the rent increase.

Also......when the tenant sees that you added value to the property then that can be used as justification to go above the 2% .....I added a fence one year.....and the next year I took up the grass and laid down roundup and a tarp then covered it with Lava Rocks "(No more grass cutting for me!)...

Tenants that have been screened properly and like living where they are living don't mind rent increases and in a sense they almost expect it.....just be a good landlord my man

Calvin Kwan · Answer

You can raise up to 10% if you can bank rent and pass through CapEx.  That's probably the easiest way to get above CPI rent increases.

Calvin Kwan · Answer

Keep in mind that if you go the CapEx route, make sure it's completed by Feb 17. After that, the cost amortizes over the life of repair, instead of 5 years. Huge difference.

Simon Stahl · Answer

@Calvin Kwan and @Ryan Conner thanks for the CapEX tip. Certainly something to look into.

Simon Stahl · Answer

@Jeff B. Sure, I would not want to just randomly increase the rent every year just because I can. The point is that I am looking for a way to increase it AT ALL if needed. In Oakland, just because the lease runs out and it changes to month to month does not mean that you can increase the rent. From what I know, there is no way to increase rent by more than 1% year over year here in Oakland. Tough renter protection here!

Ryan Conner · Answer

Not legal advice, but a blanket 10% increase in the lease (even if you say it is for future cap expenses) would be thrown out in court, especially in Oakland.  You can, however, put the costs of capex on the tenant itself if, and only if, the capex expenses are for the benefit of the tenant itself AND only after cap expenses have been paid off by landlord.   Here is a solid news article on a slightly different topic that discusses these issues a bit.

http://www.eastbayexpress.com/oakland/how-oakland-landlords-prevail-in-rent-disputes/Content?oid=4345386

Jeff B. · Answer

I got that, but as a lease has a term, when it expires you can always give Notice of Change in Terms w/o making a mess of the lease.

I never raised rents on a scheduled basis but made adjustments as the market fluctuated.  My tenants were happy and I love zero vacancies, so why harass the tenants every year with an arbitrary increase?  Yeah, I know there's an opportunity cost there but I considered that as a marketing advantage to LLs with the annual increase mindset.

Simon Stahl · Answer

Yeah, that is pretty much what I thought. Oakland is a hard place for landlords...

@Jeff B. The 10% would not be automatic. It would just be a max increase per year. Or I mean, you could word it in a way to say it will never be more than 10%. And then imagine how happy the tenant would be when I would not increase the rent at all one year or only 3%.

Jeff B. · Answer

Oakland is a Rent Control(RC) district so NO you can't do this.

Secondly, yes you can add such a clause to a lease (other than RC) but would YOU sign a lease with an automatic increase of 10% staring at you?

Penny wise and dollar foolish.

Pat McGrath · Answer

well just like you pointed out, oakland is tough. Each area can have specific rental laws in place to prohibit rental increases. Statewide its fine. However, I'm not sure you can do a year lease WITH a automatic rental increase AND lease extension. I think if you wanted the year lease to continue, you have to have them re-sign (&you would too), with the new rate clearly defined. An expired year lease goes to month to month. always check with CA fair housing laws. my gut & what i've read says no.

https://portal.hud.gov/hudportal/HUD?src=/states/california/renting/tenantrights

Is it legal to add a rent increase clause to the lease agreement?

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