In a market where supply is short and demand is high, a landlord is typically in a good position to be able to raise the market rent for their property. Any increase in rent is likely to occur once the property is vacant and ready to be put back onto the market, or when re-negotiating a new lease with an existing tenant.
Some leases are structured so that the lease has a fixed amount in exchange for a longer term (12 months or more), while other circumstances may call for a shorter term lease in exchange for a higher monthly rent. Regardless of the lease term, it is important to know the local guidelines when it comes time to notify the existing tenant that you plan on increasing their monthly rent, or plan on terminating their lease. However, if you and your tenant(s) are operating under “month to month” lease terms, it is especially important to know what is required should you choose to terminate the lease or raise the rent.
For example, there is current legislation being considered in my home state of Colorado (Senate Bill 17-245), which if passed, would require a landlord to give the tenant a 3 week notification if there are plans to either increase their rent, or terminate a short term lease. This would replace existing legislation that only requires a 7 day notice which happens to be one of the shortest notification periods in the country. This mainly applies to circumstances where the landlord and tenant have a lease agreement that is mutually agreed upon to be under month to month terms, as long term leases typically have language built in surrounding terminations and/or rent increases.
In Colorado, where rents have skyrocketed over the last several years, this notification period is extremely important as it allows a tenant more time to find a property in a market where inventory levels are historically low. In the current environment, a 7 day notification of lease termination, or a rent increase which may be unaffordable to the tenant, does not allow a whole lot of time to pack up the house and move, let alone the time it takes to search, tour, lease and move into a new rental property. There have been circumstances in Colorado where tenants have leased a property under month to month terms for a decade, only to be given a 50% rent increase and a week to move if they do not agree.
On the flipside, the proposed legislation also requires tenants to provide a 21 day notice if they want out of a short term lease. Note – Each lease is going to have its own requirements as it relates to whether or not the lease is being broken and may be subject to financial and/or legal consequence. What is important for landlords to know is that they need to be aware of what actions need to taken when terminating a lease, or increasing the rent on their properties as they will most likely be in a position to do both when managing rental property.