Phasing in rent increase

CiboC · 21-10-2016 12:01pm #1

I have recently taken over management of my father's rental property, he is getting on a bit and it was getting too much hassle for him at his age.

I would be pretty familiar with the rules covering residential rentals, mostly from the perspective of being a tenant.

He has one 3-bed townhouse that has been let out to the same tenants for a good few years, but they are way overdue a rent review, they are paying about 50% of the going rate for the area.

I don't want to be completely unreasonable and put the rent up to market level in one fell swoop, but on the other hand there is no way of increasing it more gradually now that there is a 2 year review limit.

I was thinking along the lines of giving them notice of an increase to market level and coming to a separate arrangement with them to agree not to collect the 'full' amount for a period of months to allow them to adjust accordingly, but I also don't want to dig a hole for myself either!

Other than being too soft, am I creating trouble for further down the road by considering this route?

Lux23 · 21-10-2016 12:02pm

Are you going to raise the rent 50%?

minikin · 21-10-2016 12:04pm

Looks like a 100% increase on the cards for the tenants!
If they're good tenants - place a value on that.
Bird in the hand and all that.

CiboC · 21-10-2016 12:10pm

I was thinking along the lines of telling them that the market rent for the property is now X, and they have been paying Y.

Give them the formal notice required that the rent would be increasing to X from whatever date, but tell them that in fact we would only expect to collect Y + say 50% for the first 6 or 7 months and then it would be X from thereafter.

Officially the rent would be set at X for the 2 year period to avoid any suggestion that it is more than one review in a 24 month period.

ted1 · 21-10-2016 12:14pm

For long term undemanding tenants it would be usual to give them a discount say x-15%
If you changed tenants say every 18 months you'd lose 1 months rent in agents fees, you'd spend money on prtb registration, you'd expect a few days -month between tennacies which you won't get rent for, you may get a bad tenant who wrecks the place or doesn't pay rent.
You may also need to spend mkbry making improvements, getting place cleaned etc.

Graham · 21-10-2016 12:14pm

Personally I wouldn't go down this road.

In spite of any written/verbal agreement you may have with a tenant, it would be very easy for the RTB to conclude that you are in fact imposing a series of rent increases on the tenant contrary to the 2 year rule.

That's not a legal opinion btw.

MrMorooka · 21-10-2016 1:11pm

Personally I would absolutely avoid any kind of 'unofficial' arrangement like this, it could only cause trouble in future. Keep it business, follow the rules exactly and just do a straight increase to an amount you feel is appropriate and defensible.

cruizer101 · 21-10-2016 1:20pm

Why not just charge the average of what you are proposing i.e.
[6 x (current + 50% increase) + 18 x (current + 100% increase)] / 24

There is also the possibility of discount given they are good tenants but far less messier than any phasing and you get the same money longterm.

Claw Hammer · 21-10-2016 1:41pm

Convoluted arrangements like that often backfire. The way one landlord I know does it is that he tells the tenants that the rent will be going up and he will be back in two weeks to tell them what the new rent will be. That causes the tenants to investigate the market rent themselves. When he gives them the figure for the new rent they are relieved that their worst fears have not been realised and agree the new rent without much fuss.

SB_Part2 · 21-10-2016 1:52pm

If they've been tenants for a good few years and you've had no trouble with them I'd be hesitant to increase to market rent. They might leave and you could end up with market rent or above but have terrible tenants.

Cuddlesworth · 21-10-2016 2:53pm

SB_Part2 wrote: »

If they've been tenants for a good few years and you've had no trouble with them I'd be hesitant to increase to market rent. They might leave and you could end up with market rent or above but have terrible tenants.

If its a 3 bed in Dublin, then you are arguing that keeping the current tenants is worth the loss of at least 12k income per year to his father.

CiboC · 21-10-2016 3:17pm

SB_Part2 wrote: »

If they've been tenants for a good few years and you've had no trouble with them I'd be hesitant to increase to market rent. They might leave and you could end up with market rent or above but have terrible tenants.

I'd agree entirely if it was only a few hundred euro, but it is a large 3 bed townhouse in Dublin in a fairly modern development, and the current tenants have been paying 950 euro for the last few years, so even doubling the rent would still be fairly competitive!

L'prof · 21-10-2016 3:26pm

An increase so big would surely drive the tenants out? If that's what you want to do, then fair enough

If they are paying 50% of market value right now, letting them know what the market value is and telling them that you'll be looking for a 25% every couple of years until you hit 85-90% of market value where you will cap it off because they've been good tenants? Just an idea. They may still decide to jump ship but might be a better approach?

Before: 50% mv
Now: 62.5% mv
2 years: 78% mv
4 years: 85-90% mv

Fian · 21-10-2016 4:33pm

OP, only sensible thing to do in light of recent legislation is to increase in one go to market rent. The "nicer" approach is fraught with risk and you could easily find yourself stuck for another two years on a way below market rent, whatever you first step up to. Especially bearing in mind rents are predicted to continue to appreciate significantly over the coming years.

21-10-2016 4:37pm

Ill be flamed for this, but this thread is proving to me why we need rent control in Dublin. Uneducated, unprofessional landlords causing ridiculous rising rents, policed only by market rate. Aka each other.

Ashbx · 21-10-2016 4:46pm

Hmmm, do you want the money because it is needed to pay off the mortgage or you sense an opportunity to bleed a bit more cash from your tenants?

Ive been in my house for 6 years and my landlord has (thankfully) rarely increased it. If he increased it by 50%....I would be gone. Simple as that. So its definitely something to consider. If they are genuinely good tenants, appreciate that and increase a small amount fine but 50%, in my opinion, would just drive them away and you will be out of pocket even more then.

Cordell · 21-10-2016 4:55pm

Claw Hammer wrote: »

Convoluted arrangements like that often backfire. The way one landlord I know does it is that he tells the tenants that the rent will be going up and he will be back in two weeks to tell them what the new rent will be. That causes the tenants to investigate the market rent themselves. When he gives them the figure for the new rent they are relieved that their worst fears have not been realised and agree the new rent without much fuss.

Pretty much https://en.wikipedia.org/wiki/Door-in-the-face_technique

Graham · 21-10-2016 5:07pm

Deleted User wrote: »

Aka each other.

Market rate isn't set or controlled by landlords. It's set by what every other tenant in an area is prepared to pay.

Graham · 21-10-2016 5:10pm

Ashbx wrote: »

Hmmm, do you want the money because it is needed to pay off the mortgage or you sense an opportunity to bleed a bit more cash from your tenants?

Does that work the other way too?

If the market rent isn't enough to cover the mortgage would you be ok with paying more than the market rate or would you "sense an opportunity to bleed a bit more cash from your tenants landlord?"

Ashbx wrote: »

but 50%, in my opinion, would just drive them away and you will be out of pocket even more then

How would an additional €12,000/year equate to being out of pocket?

Stheno · 21-10-2016 5:15pm

CiboC wrote: »

I'd agree entirely if it was only a few hundred euro, but it is a large 3 bed townhouse in Dublin in a fairly modern development, and the current tenants have been paying 950 euro for the last few years, so even doubling the rent would still be fairly competitive!

Where in Dublin is the house? I.e. general area? Somewhere like Dundrum?

Graham · 21-10-2016 5:16pm

Stheno wrote: »

Where in Dublin is the house? I.e. general area? Somewhere like Dundrum?

Would that change anything?

Stheno · 21-10-2016 5:19pm

Graham wrote: »

Would that change anything?

Yeah OP is claiming that a rent of 1900 for a 3 bed is still below average.

Just looking on daft there are plenty of three beds in Dublin below that

Graham · 21-10-2016 5:23pm

Stheno wrote: »

Yeah OP is claiming that a rent of 1900 for a 3 bed is still below average.

Just looking on daft there are plenty of three beds in Dublin below that

Mustn't be in the same area if €1,900 is below average. I see plenty of 3 beds above €1,900.

21-10-2016 6:47pm

Graham wrote: »

Market rate isn't set or controlled by landlords. It's set by what every other tenant in an area is prepared to pay.

What are you on about?

Of course market rate is set by landlords.

Tenants aren't going around saying, "Hmmm... I see this apartment is 1,200 a month. I'll give you 1,500."

The whole thing has gone crazy.

950 up to 1,800. Can you imagine a lone parent trying to pay that?

Crazy.

runawaybishop · 21-10-2016 6:55pm

[Deleted User] wrote: »

Tenants aren't going around saying, "Hmmm... I see this apartment is 1,200 a month. I'll give you 1,500.

That is exactly what is happening.

ted1 · 21-10-2016 8:07pm

Ashbx wrote: »

Hmmm, do you want the money because it is needed to pay off the mortgage or you sense an opportunity to bleed a bit more cash from your tenants?

Ive been in my house for 6 years and my landlord has (thankfully) rarely increased it. If he increased it by 50%....I would be gone. Simple as that. So its definitely something to consider. If they are genuinely good tenants, appreciate that and increase a small amount fine but 50%, in my opinion, would just drive them away and you will be out of pocket even more then.

A landlord is running a private business with the intent of maximum return. He can raise it to what the market can bear.

Private landlords should t be providing social housing, that's the job of the state.

Either buy your own house or you'll have to pay what the market rate is.

ted1 · 21-10-2016 8:08pm

[Deleted User] wrote: »

What are you on about?

Of course market rate is set by landlords.

Tenants aren't going around saying, "Hmmm... I see this apartment is 1,200 a month. I'll give you 1,500."

The whole thing has gone crazy.

950 up to 1,800. Can you imagine a lone parent trying to pay that?

Crazy.

It's set the market, if the landlord says I want 3,000 he won't get it, he'll lower it till the market buys the product, that's the market price

ted1 · 21-10-2016 8:09pm

CiboC wrote: »

I'd agree entirely if it was only a few hundred euro, but it is a large 3 bed townhouse in Dublin in a fairly modern development, and the current tenants have been paying 950 euro for the last few years, so even doubling the rent would still be fairly competitive!

Tenants shouldn't be paying less than a mortgage would cost.

ct5amr2ig1nfhp · 21-10-2016 8:25pm

I wouldn't bother with a phased increased - you're just asking for trouble.

If they are really good/excellent tenants, undemanding etc - I would increase to 75% of market average and leave it at that. Make sure they know they're getting the 25% discount for being good tenants. Let them know you'll be reviewing / re-evaluate in two years.

No hassle for you to go looking for new tenants, or the possibility of having the property not rented for a few weeks/months.

I would see that as win-win for both of you.

If the tenants aren't happy getting a 25% discount, just up it to full market rate. Let them move on to somewhere else... for the same price. :P

Mrs OBumble · 21-10-2016 8:30pm

I've been the tenant in this scenario. I was expecting the phone call for months before it came, and I had even budgeted for the rent increase already. So my advice - talk to them.

Rather than phasing in collection (legal risks), just choose when to apply it from. Giving them an extra month or two at the old rent would be the same as not collecting the whole new amount for many months.

PS board is dual posting again ... I only posted this once.

21-10-2016 8:40pm

I would go to 80% of market but give them good notice. They've got a great deal in recent years and will be getting a discount on anywhere else. You will get more rent and have good prospects of keeping good tenants. If they move out, advertise at 110% and see what you get.

Phasing in rent increase

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