How to avoid a large rental increase
Yearly rental increases are inevitable but this doesn’t mean that tenants have no say with regards to the percentage the landlord decides on. Moneybags writer, Alina Hardcastle takes a look into the rental industry and how one can negotiate annual increases.
Grant Rea, rental specialist at RE/MAX Living in Cape Town has some criteria for how to decide, firstly whether to agree to a renewal with a tenant and secondly what escalation will apply. According to Rea, it is unlikely that the lease will be renewed with a tenant who has:
- Been tardy with rental payments
- Made an unnecessary number of unreasonable demands
- Been regularly uncooperative with access for contractors or inspections
- Had complaints regarding their conduct in a Sectional Title Scheme or from neighbours
- Been dishonest or disrespectful in reasonably maintaining the property
Rea says there is no real science or guideline in how to establish the percentage of how much the rent will increase. Some of the misconceptions surrounding these increases include:
- The maximum is 10%
- That it needs to be in line with inflation
- An increase in rent obliges the landlord to make upgrades
Shaun Groves, Gauteng rental manager for Lew Geffen Sotheby’s International Realty explains: “The days of standard 10% year-on-year increases are long gone and if landlords are not open to negotiation they risk losing stable, reliable tenants.”
However, TPN’s managing director, Michelle Dickens says that rental increases per year are dependent on the suburb and this is based on the fact that supply and demand is different in each area.
Methods to negotiate less of an increase
Jean Markham, Pam Golding properties rental agent for Dainfern, says: “Tenants can always negotiate rental escalation with their landlord both during negotiations when first signing their rental agreement and when negotiating an extension of their lease. They should approach their landlord in this regard three months in advance of the expiry of their lease.”
Rea highlights ways to ensure less of an escalation:
- The most effective way to convey that you are an exceptional tenant is by paying on time and in full. This may mean consistently paying one day before the rent is due. This ensures that all utilities are paid promptly, which may give you leverage to negotiate a lower rental increase.
- Good communication is key and keeping the agent/landlord informed of any maintenance (necessary maintenance) and being flexible with access for repairs, will make you stand out as a reasonable tenant.
- Be reasonable and generally understanding that the agent or landlord cannot be obliged to attend to any and every small maintenance item. Sometimes fixing it yourself will aid your cause when negotiating less of an increase.
- Keeping the property neat, clean and presentable.
- Keep a record of items you have attended to or improved in the property. Remind the agent or landlord of these without trying to coerce a lower increase.
Remember that a negotiation is a two-way street. Groves recommends that tenants do their homework first rather than just asking for a reduction. He says: “Try and find practical, creative, pro-active, cost-effective solutions that benefit both parties. For example offer to take over payment of the garden/pool service or, if there are no additional services/costs, perhaps offer to repaint the interior or exterior in a colour of the landlord’s choice in exchange for a reduced rental increase.”
As a tenant, make sure that your landlord is updating your positive payment information with the credit bureau. Dickens explains: “This will benefit you enormously in a future rental application when a new landlord will be deciding whether or not you are a quality tenant based on your rental payment history. It could even improve your chance of securing a bond in the future.”