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posted: 10/14/2012 5:21 AM

How to bring long-term tenants up to market rents

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Q. My husband and I have been managing a five-unit apartment building for more than three years. One tenant is still paying approximately $260 less than the other tenants because she was already living in the unit before we took over. We didn't want to increase her rent before, as the owner has a policy of raising the rent on turnover to new incoming tenants. But now the disparity is becoming so large we are finding that we may need to raise her rent.

I know we have to give her a legal notice before the increase, but is there a cap as to how much the rent can be increased? Also, can I just increase one tenant's rent, or do I have to increase all of the rents? Any information you can provide would help immensely.

A. You raise a good question. In rental housing communities that are not subject to rent control, it is not unusual to find that long-term tenants are paying lower rents than newer tenants for essentially the same rental unit floor plan. This is simply a function of the asking rents increasing over time. Then you may have periods of time when the rental market is weak and landlords will make special offers or concessions to increase occupancy. Then when the market demand improves, the asking rents go up and large disparities can occur.

First, it doesn't sound like you are in one of the very few areas of the country with rent control, so there isn't likely to be any maximum amount you can increase this tenant's rent. I would suggest you contact your local affiliate of the National Apartment Association to make sure. But the fact that there is no maximum rent increase limit does not mean that you should prepare a rent increase letter asking for $260 more in rent anytime soon.

I think you should send your tenant a letter and explain that she has been fortunate to be paying a below-market rent for a period of time and now you need to begin to adjust her rent every six months until she is closer to the rent being paid by other tenants who have been at the property for at least a year.

I would suggest you propose to increase the monthly rent by $50 now and again in six months. That will be followed the next year with two more increases of $50 so that the overall increase is $200 over a 24-month time frame.

Q. I am in the process of relocating and I signed a lease for an apartment two weeks prior to the scheduled move-in date. At that time, there was still someone living in the place so I never had the ability to see the rental property before signing the lease. I still don't have a copy of the lease.

Then two days prior to move in, I met with the landlord and we jointly were walking through the rental unit for my move-in inspection checklist when I notice the bathroom had mold and in the kitchen there were several live insects -- mostly spiders, but also some flies and roaches.

I told the landlord she has to take care of that, and she told me that I was responsible for pest control. We argued to the point where it was going nowhere until the police showed up.

I want to find another rental but I already have given her the first month's rent, the last month's rent and the security deposit. She was willing to give just the first month's and last month's rent back but not the security deposit, which she claims I must forfeit because she took the rental unit off the market. I told her she must be crazy for me to move in to an unclean place.

Am I able to get my money back? If so, how would I go about doing so? I have thought about just cleaning the bathroom and buying some bug spray, but there's already tension and I haven't even moved in yet, which makes me worried about what type of landlord she would be in the future.

A. You have good reason to be concerned, and I think your instincts about a landlord who will not properly maintain her rental units are legitimate. Any landlord who would expect you to move in with live insects and visible mold in the bathroom is not likely to be a conscientious and professional property owner when the inevitable problems occur during your tenancy. So I would fully support your desire to cancel the scheduled move-in and negotiate a return of as much of your money as possible.

The fact that you have already signed the lease without seeing the rental unit is a good reminder that you should either avoid that scenario or have a specific agreement with the landlord in advance. I know that today, with so many tenants relocating across regions or even countries and making their rental decisions based on photos on the Internet, your situation is not unique or entirely your fault. It happens.

But there is no easy answer without knowing what you signed. You should have been given a copy of the lease, and I would immediately ask the landlord to provide you with a copy.

You should review the lease and see exactly what it says. It is unlikely that there is anything that addresses the possible cancellation of your lease, but you should see if there is any language about a "holding deposit." That is essentially what your prospective new landlord is proposing to withhold from the funds you have paid in advance. The landlord will give you back the full rent you paid, as you haven't and won't be taking possession. But she is asking you to forfeit the full security deposit, which seems rather unreasonable unless the deposit is very modest or the lease contains a holding deposit that is equal to the full security deposit. In my experience, holding deposits are rarely the full amount of the security deposit.

Without a specific holding deposit agreement, the key issue will likely be how long the apartment was taken off the rental market and how much rent would cover that time frame. In other words, you indicated you signed the lease about two weeks prior to the scheduled move-in. So unless you had committed verbally and requested the landlord to take the apartment off the market much sooner than when you actually signed the lease, then the reasonable amount that the landlord could claim was lost by you changing your mind (disregarding the fact that you had legitimate motives) would be two weeks' rent.

You should put all of your discussions in writing as soon as possible after speaking to your landlord. If you meet in person, I suggest you send her an email outlining what was discussed and confirm any agreements that you made as well as any areas where you agreed to disagree.

• Property manager Robert Griswold is author of "Property Management for Dummies." Email: Rental Q&A@rgriswold.inman@retodayradio.com.

2012, Inman News Service

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