Unfortunately, as with most things in life, rent goes up each year - but does this mean that tenants have no choice but to expect whatever percentage the landlord decides one?
“As a letting agent with much of 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,” says Grant Rea, Rental Specialist at RE/MAX Living. “In Cape Town where rentals are at a premium, the escalation of rent at the anniversary of the lease can seriously impact the tenant’s budget for the next year. This is compounded further by the lack of available long-term rentals during the season.”
Rea adds that as an agent for numerous landlords, he has some criteria for how to decide, firstly whether to agree to a renewal with a tenant and secondly what escalation will apply. According to Rea, 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
Rea says that surprisingly there is no real science or guideline in how 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,” say Rea.
Below are ways to ensure less of an escalation or methods to negotiate less of an increase:
1. The most effective way to convey that you are an exceptional tenant is by paying on time and in full. This may mean consistently paying one day before the rent is due. This ensures that all utilities are paid promptly, which 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 trying to coerce a lower increase.
“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,” Rea concludes.