TIP OF THE MONTH - December 2011


Source: Essential Facts-Real Estate Management
            Joseph DeCarlo

There are several types of rent increases, as well as adjustment to services that act as rent increases.

Economic Increase: If operating expenses (insurance, taxes, utilities, etc.) a Landlord may decide to make a corresponding increase in rent.  The amount of the increase is usually based on what the market will bear.  In some cases, expenses increase but the rental market will not permit rents to be raised; the increased costs are then absorbed by the property.

New Tenant Increase: If market conditions permit, rent should be increased whenever occupancy changes.  This accomplishes two goals: existing Tenants feel they are getting a better deal because of their longevity; it helps establish a new higher market level for future increases for existing Tenants.

Elimination of Services: Another form of increase is the elimination of Tenant services.  Examples: Discontinuing free cable television, converting master meter electric & gas utilities to separate meters paid directly by the Tenants, reducing frequency of inspections, discontinuing supplying appliances (washer & dryer, micro-wave ovens, stoves, refrigerators, etc.)

Scrooge Increases: Landlords should not schedule increases at in-convenient times, such as holiday season.  Such “Scrooge increases should be avoided, since they can adversely affect the Landlord’s relationship with Tenants.

Nuisance Increases: This is a small increase in rent that a Tenant will agree to pay simply to avoid incurring the cost and bother of moving. Nuisance increases are used as a last resort when a larger economic increase is not feasible.

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This web page was updated on 11/29/2011.