Can Property Management Increase Rents?
Searching for an experienced partner to manage your rental property? Palmetto State Properties is known for their ability to manage, market and maintain rental properties in the greater Charleston, SC area. Contact us today.
Can Property Management Increase Rents?
Palmetto State Properties involves the property owner in all rental rate decisions before making changes. We can provide a recommendation based on the market rate, whether it’s a new listing or an existing tenant, etc. however, we won’t make any final decisions without your approval.
A Big Decision
The decision to hire a property manager requires some research and careful thought. Not all landlords are looking for the same things from a property manager. Some prefer to outsource nearly all aspects of property management, while others prefer to limit the decisions their property manager can make on their own.
For example, most landlords have few concerns about property managers handling such tasks as rent collection, applicant screening, routine maintenance, and so on, without consulting the property owner. However, it’s common for landlords to retain certain decision-making authority, such as increasing rents. That’s not to say that they don’t want their property managers to suggest the need for an increase or even to recommend a specific rent increase amount. But many landlords want the final say in approving a rent increase before it is announced to tenants. So one concern for landlords is whether to give their chosen property manager the authority to raise tenant rents on their own.
The Property Management Contract
The contract between the property manager and the property owner should identify the specific property management services to be provided. Property managers do not have the right to raise tenant rents unless the property owner has agreed to that by signing a contract that authorizes the property management company the authority to do so.
Many property management companies include the right to raise rents in their standard contracts. Unscrupulous property managers may hope that property owners don’t read the contract carefully enough to notice that by signing it, they are authorizing the property manager to raise rents, perhaps without the owner’s knowledge. This can lead to disgruntled tenants. It’s even possible that an unethical property manager will pocket the rent increase for personal profit.
Even absentee, “hands off” property owners must read a potential property management agreement very carefully and perhaps seek a legal opinion before signing it. This is why contracting with a trusted property management company like Palmetto State Properties is so important, as we understand how to form a long lasting, trusting, relationship with both the tenants and the property owner.
Legal Considerations
Before authorizing a property manager to initiate rent increases, it’s important to make sure the company is aware of the state’s laws governing rents. At Palmetto State Properties, we keep up to date with all necessary legal aspects. In South Carolina, for example:
- There is no legal limit on the amount of any rent increase.
- Rents can be increased for any reason other than for discriminatory or retaliatory purposes.
- Tenants must be given reasonable notice of impending rent increases, but there is no specific notice period. (One month is considered reasonable in most states.)
- There is no limit to how frequently rents can be raised as long as all other legal requirements are met.
- When there is a rent increase, a proportional increase in the security deposit is customary.
A property manager who is unaware of the legalities regarding rent increases or simply ignores them can seriously damage landlord/tenant relationships.
What Is a Reasonable Rent Increase?
While no tenant wants to pay more for rent, most people accept that rent increases are inevitable. Landlords’ expenses increase with inflation as utilities, insurance, maintenance, taxes, and other costs go up. The question is how much of a landlord’s increased costs can be passed on to tenants without risking them moving to a less expensive rental property.
The most important guideline for increasing rents is to research the local rental market. Increasing rents by too much can result in an exodus of tenants moving to less expensive properties or to comparably priced properties that offer more for the money.
Keep Tenants Informed
It’s easier to justify a rent increase when it’s accompanied by upgrades or new amenities that improve the tenant experience. Tenants are less likely to protest a rent increase when the property is well-maintained, attractive, and comfortable. It’s a good idea to let tenants know, throughout the duration of their lease, what improvements the property owner is investing in and how they will benefit.
Above all, don’t spring rent increases on tenants without sufficient advance notice. Even modest rent increases can make it necessary for at least some tenants to adjust their budget, particularly when wage increases aren’t keeping pace with inflation. Although South Carolina does not mandate a specific notification period, it’s common for leases to specify that rent increases will not occur during the term of the lease. And tenants are likely to expect a rent increase upon lease renewal. Still, the best practice is to notify them in writing 30 or 60 days before the renewal date so that tenants have a chance to evaluate their options.
Final Thoughts
If, as a property owner, you choose to allow your property management company to determine the timing and amount of rent increases, you owe it to yourself and your tenants to be very clear as to the extent of the property manager’s authority to raise rents. At Palmetto State Properties, we can help guide you through this process. Remember, you have every right to insist that the property management agreement accurately reflects your wishes. Having a clear understanding that is documented in writing can prevent unnecessary conflicts with your property manager and your tenants.
Get in touch today to find out how we can help.
