The recent rise in interest rates will affect many landlords, but should you pass on the rise to your tenant?

Tenants do expect rises in rent, and rents have been steadily rising over the past couple of years; the latest Corelogic Quarterly Rental Review, released in April shows:

• National dwelling rents increased 1.0% over the month of March and rose 2.6% over the three months to March, up from the 1.9% rise recorded over the December Quarter.
• Regional rents increased by 2.9% over the March quarter, while capital city rents rose by 2.5% over the same period.
• Regional house rents outperformed regional units, recording a 2.9% quarterly rise in the rental index, compared to a 2.8% rise in regional unit rents.

While tenants do expect periodical rent rises, you will need to assess how the rate hikes will impact your budget before you think about passing on the rise to tenants, as there are other factors to consider.

Is it worth the rise in rent?

First and foremost, is the property worth the increase in rent? You can check listings sites to see what the rental income is for comparable properties in the area.

And don’t forget, if your current tenant leaves because the rent is too high, finding a tenant does incur costs; while vacancy rates are low, (the latest SQM Research shows national residential property rental vacancy rates is at 1.1% in April 2022) there could still be a period of time the property is empty with no income. Meanwhile, you’re still paying the mortgage.

The legalities of rent increases

There are also the legalities to consider; a landlord cannot increase rent before the end of the rental lease period.

You can increase rent once in a 12-month period for fixed terms less than two years. For fixed terms more than two years rent increases can only happen if the agreement already states the amount or the method on how the increase will be calculated.

Furthermore, if you are planning to increase rent, you need to give your tenants a written notice at least 60 days before the rent is increased.

Tenants have rights, and if they are not given adequate notice or not notified in writing, they can refuse to pay the rent increase. Furthermore, if they feel the rent rise is unfair or excessive, they can also apply to the NSW Civil and Administrative Tribunal (NCAT) within 30 days.

We believe you should increase rents at intervals, but they should be fair. As we have a good professional working relationship with tenants, we very rarely are questioned when they receive a rent increase notice at the appropriate time.

Our management team consistently outperforms our competitors; because of our marketing and property management strategies, our properties are leased in well under the average time period of other agencies in our area, and our vacancy rate is frequently under the REI average.

We are a family run business and have been in the business for nearly 50 years; we treat each and every one of the properties we are entrusted with like our own, and we are constantly looking for ways to get the best out of the properties we manage.

Find out more about our property management services – give us a ring on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or call into our Cardiff office.

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