Should you raise the rent on your rental property?
As a landlord in New South Wales, it’s essential to understand the legal requirements surrounding rent increases. Not adhering to the correct procedures could result in legal repercussions or disputes.
Let’s ensure that you’re compliant and maximising your income by breaking down the key points you need to know.
How Often Can You Increase the Rent?
In NSW, rent increases are strictly regulated to protect tenants from unpredictable hikes. The rules vary depending on whether the lease is a fixed-term or periodic agreement:
- For existing tenants, rent increases can only occur once every 12 months.
- For new tenants, you can set the rent at market value when they sign a new lease.
- For leases signed before 31 October 2024, landlords may increase the rent more than once a year, but only if the increase is clearly stated in the rental agreement (e.g. a fixed dollar amount or percentage). If the lease does not specify the increase, the landlord must comply with the 12-month rule.
According to the NSW Government, “Rent cannot be raised within the first 12 months of a tenancy. After an increase, the landlord must wait at least 12 months before another increase.”
Providing Proper Notice
When increasing the rent, landlords must provide tenants with at least 60 days’ written notice before the new rent takes effect. The notice must:
- Be in writing (email is acceptable).
- State the exact new rental amount.
- Include the date when the increase will take effect.
- Be signed and properly addressed to the tenant.
If the rent increase is included in the original rental agreement (for fixed-term leases before 31 October 2024), landlords are not required to send additional notice.
Setting the Right Rent: Market Considerations
Charging excessive rent may discourage good tenants, even though rental increases are necessary to match inflation and property expenses. It’s important to compare your rental property with similar properties in the area to determine a fair and competitive price.
Consider:
- The median rental price for similar properties in your suburb.
- The vacancy rate. If properties are sitting empty for too long, you may need to reconsider your pricing strategy.
- Tenant retention. Long-term tenants provide stability, so frequent rent hikes might not always be the best approach.
Negotiating a Rent Increase
If a tenant believes the rent increase is excessive, they have the right to negotiate before the new amount takes effect. Tenants can use the NSW Government’s Rent Check tool to compare the proposed rent with the median rent range in their postcode.
If an agreement is reached for a lower increase, no additional 60-day notice is required. However, if no agreement is made, the tenant can apply to the NSW Civil and Administrative Tribunal (NCAT) to challenge the increase. The Tribunal will assess factors such as:
- Comparable rents for similar properties.
- The property’s condition and included amenities.
- The landlord’s costs, including council rates and maintenance.
Avoiding Common Mistakes
- Increasing the rent too frequently: Landlords must adhere to the 12-month rule for existing tenants.
- Failing to provide the correct notice: Always issue a formal written notice at least 60 days before the increase.
- Pricing your property too high: Overpricing could lead to vacancies, ultimately reducing your rental income.
- Ignoring tenant feedback: A long-term, reliable tenant is often more valuable than a short-term increase in rent.
Making the Most of Your Returns While Being Compliant
At Mclaws Property, we help landlords deal with rent increases while maintaining positive tenant relationships. Our team ensures you’re compliant with the latest NSW rental laws while securing the best possible returns on your investment. If you’re considering increasing the rent on your property, reach out to us today for expert guidance. We’ll help you determine a competitive price, manage tenant communication, and ensure a smooth transition.