Rent Increase: Setting and Collecting

Written By: Farbod Gharbi

Setting the right amount of rent for a rental property is by far one of the most important tasks that needs’ to be acknowledged by the right property manager. The rent amount determines if your property can be rented or not and to whom. If the rent amount is too low then it may attract the wrong tenant to your property. Conversely if the rent amount is too high, then your property may be left vacant. Not only that but there are a multitude of factors that goes in when determining the rental rate, setting and collecting. Therefore you should always determine the right property management, and ask them the following questions in your interviews:

How is the rental rate determined?

The contributing factor that determines the rental rent is market price. Market price is the established price of the market that a similar property such yours goes for. The right property management company would tell you what that market price is since they work in the industry and have an up-to-date knowledge. Then other contributing factors include how new or old the property is, the location of the property, the amenities provided within the property and so forth. The right rental rate will bring about the right tenant and that would prevent your property from being vacant for too long.

How often can there be a raise in rent?

According to LandlordBC, “Landlords can only increase the rent once a year by an amount permitted by law or an additional amount approved in advance by an arbitrator – they need to use the right form and give the tenant three full months’ notice of the rent increase.” Furthermore, there is a limit for rent increase each year since this amount changes every year. For example, the allowable rent increase for 2017 is 3.7%.

EXAMPLE:

Rent as of Jan 1st 2016 is $1,400.

Based on this information then the rent can be increased on July 1st, 2017 by up to $51.80 as long as the tenant receives the rent increase notice no later than March 31, 2017 (Landlords must ensure the tenant receives 3 FULL rental months’ notice of the rent increase). With this increase, the total rent will be $1451.80.

–According to LandlordBC

However if no tenant resides in your property, then a property manager can accordingly increase the rental rate by 3.7% in 2017 from the current market price.

Are there any contractual escalators in the lease?

Contractual escalators are when the rent rate for the tenant is increase automatically without the need to negotiate with the present tenant or provide further explanations. Within this context, each property management firm is different. Some have this set-up within their tenancy agreement and inform the tenants in advance. Others increase rent by providing that the tenant receives a 3 full month notice. Or sometimes landlords have a really good tenant and they don’t require a rent increase for the sake of keeping the current tenant, therefore they request property managers to increase the rent once the property becomes vacant.

How is the right tenant chosen?

(One of the most important factors that contributes to rent collection)

Perhaps one of the most important things is choosing the right tenant. It is important to be objective and as the saying goes “Don’t judge a book by its cover,” however there are certain things a property manager can do for you to pick out the best tenant possible. It is important to note that discrimination laws hold the same standard for all tenants. That being said there are certain standards that have to be met by applicants that will lead them to the final stages of the rental application process. First objective is that the prospective tenant must meet the income requirement. It should reveal that they are capable of paying rent and also provide an established history of paying rent on time with their most recent landlord. Second objective is good credit history, although there may be certain flexibility in this area based on the discretion of the property manager. The third objective is letter of reference from prior landlord and/ or a letter of work employment from present employee. Through these criteria a property manager can determine if the tenant can provide rent on time and other attributable characteristics of a good tenant.

How is rent collected?

The best way to collect rent is through a defined amount of year rental agreement that is paid through Pre-Authorized-Payments. This would create an automated monthly payment that goes from the tenant to the property management firm. Also this process is secured and no payment gets lost or forgotten. However there are other forms of payments as well, such as: cash and post-dated cheques. It is important to note that post-dated cheques can only be requested for the duration of the term of agreement and when the tenant moves-out then remaining cheques must be returned. In the case of cash payments, receipts should be provided to the tenant. In this manner it becomes evident that the tenant paid the rent and the property manager is aware of it.

How are unpaid checks or utilities dealt with?

Property management firms should have a provision within their rental agreement that states that tenants agree to pays for entire amounts of returned checks. In this manner, the property managers can point directly to the agreement and allow the NSF (non sufficient funds) Clause do the heavy lifting. Therefore the responsibility falls upon the renter since they did agree and sign off on the rental agreement in the first place.

Therefore the first step is to notify the tenant that they have insufficient funds. A competent property manager will inform them of this via Certified Mail, which is a good idea since it will indicate the property manager that the tenant has received the mail and there is proof of that if this issue proceeds and goes to court. At this point onwards all conversations should be noted down.

Now when a 10 Day Notice to End Tenancy for Unpaid Rent or Utilities is initially provided then tenant has five more days to either pay the overdue amount or dispute it. This is called a Direct Request. Within this process, an adjudicator will consider a landlord’s possession of a rental unit only through the written evidence provided by the landlord.

From then on a Landlord can use a Direct Request to claim for an Order of Possession when a tenant hasn’t paid their rent or utilities and a Monetary Order for unpaid rent or utilities.

–As stated in Landlord BC.

Now it’s inevitable that a bounced check or unpaid utilities will never happen to your property over the years of renting to multitude of tenants. However when it does, your more likely to succeed with a discretion of a professional property manager as they have the knowledge, experience and skills to apply for a Direct Request and write a letter to the adjudicator that will more than likely succeed. This will save you time, money and headache.

How are delinquent payments dealt with?

The main objective of a property management firm is to provide quality service. In this manner two things happens: 1. The tenant is receiving excellent service and when they are satisfied, they would have no reason to be delinquent in their payments; 2. The property management is on top of their game being alert to any late payments and keeping a close eye on any further issues. Now when a late payment occurs, for any reason, then a property manager should be firm upon the executions of the terms of the agreement. For instance: this means to inform the tenant of their late payment, and let them know as stated in the agreement that added charges will apply for any future late payments.

About the Writer

Hello dear readers,

Thank you for taking the time to read my article, I hope you all have had a chance to read my previous article ‘Determine If You Require A Property Management Firm’. I hope this informative article has been helpful in trying to determine the different factors to rental increase and the complexity to successfully collecting rent. That is why for convenience, expediency and a well-educated service it is well worth it to refer to a licensed professional like myself in property management. Stay tuned for my upcoming article, and thank you for your support.

My contact information:

Linked In Profile: Farbod Gharbi

Facebook Page: Farbod Gharbi Strata Property Manager

Instagram: farbod.gharbi

More from this writer:

? 10 Warning Signs of Bad Tenants

? It’s All about The Tenant Now

? Be The First To Rent Out

? 10 Reasons Why Property Management Can Work For You

? A General Idea Of Property Management Fees

? Determine If You Require A Property Management Firm

#FarbodGharbiStrata&RentalPropertyManager #InformativeArticles #PropertyOwners #Landlords #Renters #Houses #Apartments #Condos #Commercial #Strata

References:

Photo accredited to: https://wallpapersafari.com/w/BiEFvg/

Thompson, S. (2014). 7 Tips for collecting rent and getting paid on time.

Retrieved March 4, 2017, from https://www.landlordology.com/collecting-rent-on-time/

Eberline, E. (2016). Options for collecting rent from tenants.

Retrieved March 4, 2017, from https://www.thebalance.com/collecting-rent-from-tenants-2124980

LandlordBC.ca. Housing and Tenancy. Retrieved March 4, 2017,

from https://www2.gov.bc.ca/gov/content/home