QUESTION: Have I validly increased rent for my occupants if I give tenants written notice of the increase without obtaining a signature on a new lease?
ANSWER: This is commonly asked question, and, I know that people have opinions that are all over the board on this subject. There are those who claim that without a signed lease agreement or a signed addendum to update the lease agreement you can not validly increase rent. There are others who claim that you can only validly increase rent if you have a clause in your rental agreement that allows you the make changes to the terms and conditions of the lease and spells out how you will make those changes for example: written notice at least 30 days in advance of the change in the lease term, mailed to the tenant or posted at the office. I have even seen some of those who say there is no way to raise the rent once you entered into a written lease.
My answer does not really follow any of those schools of thought.
First, however please recognize that I am making an important assumption when I answer this question. The assumption is that all of your tenants are on month to month rental agreements. This answer does not apply to tenants who are under longer term agreements that have not yet expired, for example those who have prepaid six months rent and are still in that prepaid six month period. For those type of tenants, I do not necessarily believe there is a way to raise the rent during this prepaid term or this lease term. However, assuming that your tenants are month to month I contend you can give written notice of a rent increase and make it effective the next month. Remember, you or the tenant can change the terms or conditions if both of you agree to it 30 days before the lease renews again, i.e., one month advance notice. This is true because any change properly noticed to the tenant and agreed upon by the tenant serves as the basis for a new or updated rental agreement each month.
In a perfect world, your rental agreement should contain a provision that provides how you give notice of a change in the terms and how that change becomes binding 30 days thereafter however, I am not convinced that in most states that this provision is an absolute requirement to raise rent because if the tenant does not agree to the rent increase notice the lease, would be considered terminated (as opposed to renewed). For example, you may not require any notice or much less notice from a tenant in order for a tenant to terminate such as 10 days prior to the end of the month or the end of the term. I hope you will agree that cancellation of the lease is a change to the terms and the conditions of the lease, that is it will not renew for the next month. Why then shouldn’t the converse be true and you be allowed to change a term and condition of the lease even though you may not have the exact lease clause discussed in this article.
Thus, changing the rental agreement is relatively as simple as saying “your rent is increasing next month if you agreed to it you will pay the increased rent with your next rent payment and this will become a new agreed upon term.” It should be done with written notice to the tenant. If the tenant does not agree then you are in the position of terminating the tenancy and they will leave voluntarily or you will ask them to go. These are month to month agreements renewable only if both parties agree. You obviously do not agree to renew if the tenant does not want to pay the new rent that you are proposing to charge for the space.
Can you imagine if you had to get a new written agreement every time the price something went up? For example, do you sign a entire new credit card agreement when your credit card company raises your minimum payment or your interest rate? The answer is No. You have the right to opt out and not accept that interest rate but you also have to cancel the credit card and pay it off. There is nothing different between a credit card in this instance, and self-storage.
In this economy if you can get away with a rent increase do not worry about getting new signed rental agreements, but do give the tenant notice at least 30 days in advance with a statement along the lines described in this article.
You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at email@example.com or mail them to Jeffrey Greenberger c/o Katz, Greenberger & Norton LLP, 105 E. Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721-5151, or visit his website at www.selfstoragelegal.com.