How to negotiate a lower rental increase

How to negotiate a lower rental increase

Unfortunately, as with most things in life, rent goes up each year – but does this mean that as a tenant you, have no choice but to accept whatever percentage the landlord decides upon?

As a letting agent with much if my portfolio coming up for renewal over the summer months, it is always interesting dealing with the expectations of both tenants and landlords and helping them meet in the middle. In Cape Town where rentals are at a premium, the escalation of rent at the anniversary of the lease can seriously impact a tenant’s budget for the next year. This is compounded further by the lack of available long-term rentals during the season.

As an agent for numerous landlords, I have some criteria for how to decide, firstly whether to agree to a renewal with a tenant and secondly what escalation will apply. It is unlikely that the lease will be renewed with a tenant who has:

  • Been tardy with rental payments
  • Has made an unnecessary number of unreasonable demands
  • Been regularly uncooperative with access for contractors or inspections
  • Had complaints regarding their conduct in a Sectional Title Scheme or from neighbours
  • Been dishonest or disrespectful in reasonably maintaining the property.

Surprisingly there is no real science, fixed guideline or law to establish the percentage of how much the rent will increase. Some misconceptions about this include:

  • The maximum is 10%
  • That it needs to be in line with inflation
  • An increase in rent obliges the landlord to make upgrades

For many landlords, escalations should reflect a fair return on their investment and should be market-related. An industry standard seems to be 10% per annum but once again the landlord may at his discretion decide to forego the increase or to increase this in excess of 10% to ensure the rental is market-related. Tenants need to keep in mind that the increase in rentals is influenced by supply and demand more than any other factor.

Below are ways to negotiate less of an increase:

  1. The most effective way to do this is to become an exceptional tenant, by paying rent and any utilities on time and in full. This may mean consistently paying one day before the rent is due. This may give you leverage to negotiate a lower rental increase.
  2. Good communication is key and keeping the agent/landlord informed of any maintenance (necessary maintenance) and being flexible with access for repairs, will make you stand out as a reasonable tenant.
  3. Be reasonable and generally understanding that the agent or landlord cannot be obliged to attend to any and every small maintenance item. Sometimes fixing it yourself will aid your cause when negotiating less of an increase.
  4. Keeping the property neat, clean and presentable.
  5. Keep a record of items you have attended to or improved in the property. Remind the agent or landlord of these without being petty and unreasonable.

At the time of the anniversary of the lease, you would confidently be able to request a lesser increase if you have been a great tenant.

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