Negotiating Rent Increases
The rental market is extremely competitive at the moment and it’s not just applicants that are feeling the pinch. Increasingly, we’re also seeing landlords looking to capitalise on the current market conditions by raising the rent they charge.
For some investors, an increase is necessary to help them meet the rising cost of owning and maintaining a property. For others, raising rents is mostly about ensuring they are achieving the maximum return on their investment. Either way, as a tenant, a rent increase means you need to find more room in your household budget.
But what do you do if you simply can’t afford a proposed increase – or any rent increase, for that matter? Other than moving out, what options do you have? And how should you respond when you are given notice of a proposed rent increase?
In Victoria, rent increases must adhere to a range of requirements set out in the Residential Tenancies Act 1997. Specifically, this legislation states that:
Rent cannot be increased during a fixed-term period (unless written into the lease): If you are still within the initial fixed-term period of your lease agreement, your landlord generally cannot increase your rent. However, once this period is over, most tenants roll onto a periodic (month-to-month) agreement, which does allow for rent increases. Landlords can also include a planned rent increase in the lease terms; however, this must be agreed with you upfront.
Tenants must be formally notified of any proposed increase: If your landlord wants to increase your rent, they must advise you of this in writing. This must be done at least 60 days before the increase is expected to take effect.
Proposed increases must be “reasonable”: While there is no cap on how large an increase can be, the legislation states it must be considered “reasonable”. As such, your landlord should be able to explain how they calculated the increase they’re proposing (e.g. increased costs, market rates, etc.).
Landlords cannot increase rents too regularly: Generally speaking, your landlord cannot increase your rent more than once every 12 months. This means that, if your rent has just increased, it cannot be increased again for at least a year. If you’re on a periodic agreement that started before 19 June 2019, increases can only be made every 6 months.
Your options as a tenant
As a tenant, it’s important to remember that any rent increase your landlord proposes is exactly that – a proposal. As such, how you respond to their decision is entirely up to you, and there are a few paths available.
Obviously, you can just accept the proposed increase and adjust your household budget to absorb the larger monthly payment. If you can comfortably afford to do this, it’s usually the easiest approach, particularly in such a competitive market. However, you should still do your own research, consider your options, and make sure what is being proposed is reasonable.
Alternatively, you could:
Counter the proposal: Finding a new tenant can be quite a time consuming and expensive process for a landlord. As such, most would prefer to keep a good tenant in place, even if it means receiving slightly less rent. Acknowledging this, you may be able to negotiate a smaller increase by responding to the initial notification with a counteroffer. This should be based on local market research and what you can afford, which you can explain in your response.
Challenge the amount: If you believe the proposed increase is unreasonable and your landlord won’t negotiate, you can request a rent increase investigation. This will be carried out by Consumer Affairs Victoria, who will inspect the property and provide a formal assessment report. If this says the increase is too large, but your landlord still won’t negotiate, you can then apply to VCAT. VCAT may then set a maximum rent for the property, using the assessment report as a guide.
Move on: Depending on your situation, you may decide you would prefer to look for somewhere else to live. This could be because you need – or want – to find somewhere more affordable, or had already been thinking about moving. Either way, before committing to leaving, we recommend doing your research and making sure there are other suitable properties available. We also suggest putting together a move budget, and weighing up whether it’s the best financial decision.
Your best course of action will depend on a range of factors, like your current financial situation and future plans. As such, if you receive notification of a proposed rent increase, you should carefully consider your circumstances before responding. It may also be worth consulting an independent rental expert, like Your Home Hunter, about the best approach for you.
Want to discuss this further?
If you have been notified of a proposed rent increase and aren’t sure what to do, Your Home Hunter can help. Our new Consulting Service is designed to provide targeted advice and support, and answer any questions tenants may have. Our experienced team can also help you assess your current tenancy terms, understand your options, and plan your next steps.