Raise Rents Legally
By Christopher A. LaVoy, Esq.
Tiffany & Bosco, P.C.
Over the last year I have received many calls about the procedure for raising rent. If the tenant is new, this is easy. You simply specify a higher rent in the lease signed by the new tenant.
However, the procedure is more complicated when raising the rent for an existing tenant. When taking over a facility with below market rates, an operator will often want to raise the rent for all existing tenants. An operator may also wish to selectively raise the rent for a particular existing tenant, such as one who rented long ago at a lower rate, or when trying to get rid of a problem tenant by raising his rent.
AGREEMENT FROM BOTH PARTIES
Raising rent for an existing tenant can be problematic because both parties to a contract must agree to any changes in it. You would not think it permissible for your mortgage company to unilaterally impose a higher interest rate on your fixed rate home loan, or for your car leasing company to raise your monthly leasing payment, because both of these actions would be contrary to the written agreement between the parties. One party cannot rewrite the deal without the permission of the other.
However, the typical self-storage lease is different. It creates a month-to-month lease where the tenant renews the lease each month by his continued occupancy of the unit. Because there is a new lease each month, this creates the opportunity to set new terms for the lease, including raising the rent (just as your car leasing company could raise your monthly payment for a new car lease after your old one expired)
But it would be an enormous hassle to get every tenant to come into the office to sign a new lease when raising rents at a facility. This would mean endless letters and follow-up calls to tenants to cajole them into signing a new lease.
AN ALTERNATIVE TO SIGNATURES
The alternative and better approach is to have the existing tenant consent to the rent increase (or other lease change) by conduct besides his signature. For example, software companies obtain your promise not to pirate their product by stating on the packaging that you agree to the restriction by breaking the seal on the package. A similar approach is recommended here.
You should send a letter to the tenant stating that you are increasing his rent as of a particular date and the tenant’s continued occupancy of the unit after that date constitutes his acceptance of the rent increase. Here is an example letter:
“Dear Mr. Smith:
Effective June 1, 2007, your rent for Unit 23 will be raised to $75.00 plus tax. If you do not wish to pay the increased rent, then you must vacate the unit by this date. Your continued occupancy of the unit after this date will constitute your ratification of the rent increase.”
Two things to remember: first, make sure the effective date for the rent increase is the first day of a one month lease term in the future (i.e., an upcoming anniversary date of the lease); second, make sure to send the letter at least one month before the rent increase takes effect (for example, for a May 1 rent increase, you should send the letter out by late March).
With regard to the second point, some leases may have a provision allowing the operator to change a term of the lease upon ten days notice or some other period shorter than one month. If your lease has such a provision, you may be able to shorten the process.
If the tenant remains in the unit after the effective date of the rent increase, but refuses to pay the increased rent, then you may initiate a foreclosure proceeding against the tenant.
Also, you may use this same process to change any other term of the lease
[This article deals with a law related subject at a general level and is not intended for you to rely on. You should consult a lawyer before making a final decision in a situation involving any legal issues.]
Christopher A. LaVoy is partner in the law firm, Tiffany & Bosco, P.C., and serves as AZSA’s legal counsel.
Source: Behind Closed Doors, AZSA Newsletter Archives