Rental increase with existing tenant

[RevT]

Hi all

We recently purchased another investment property and decided to keep the existing tenant who has been there 15 years.
In our opinion the previous landlord hadn’t been doing their job too well – they hadn’t increased the rent in a long time
so it was currently under rented, they hadn’t taken a bond, and the existing tenancy agreement we inherited which is
periodic, didn’t have a tenant signature or date on it.

Upon settlement our first step was to notify the tenant of a rent increase. Despite there being no solid tenancy agreement
with the tenant’s signature or date, we have discovered (our first lesson) that this is not enough for us to immediately enforce
a new agreement, so we have had to send our 60 day letter to notify the tenant of this rent increase.

Now of course the tenant is not happy about this and is fighting us every step of the way, believing that we are asking for
too much rent for the current condition of the property. He has had market appraisals done on the property which have come
back lower than our intended increase, and is threatening tenancy tribunal action if we don’t bring our proposed new rent
down. Now in all fairness, the property does need some tidying up, and we plan to start doing this, and get it done within the next 60 days.

I guess my main question is, when sending out the rental increase letter, can we state that we will be increasing the rent
to a level that will reflect the property after the tidying up work has been done? Or does it have to be for its current condition?
- the problem being then that once this is in place, we will not be able to increase the rent for a further 6 months, which gives
us little incentive to get on with tidying up the property straight away.

Any thoughts would be much appreciated.

[kiwibean]

If they don't like it they can move out!

[Eugene]

I am pretty sure you can terminate the tenancy and tell the tenant he will need to sign a new tenancy. Then you can set whatever rent you like. Worked for me.

[PTILoveYou]

If the tenant doesn't like the new rent, they can always leave.

[RevT]

Thanks for your feedback.

Regarding terminating the tenancy, if we are to do this then we have to provide the tenant the usual 90 days notice?

Apparently now to even get a bond we have to either get the tenant to give one willingly, or get them to sign a new tenancy agreement, again willingly.

To otherwise get them on a new agreement means they have to want to, or we have to give them their 90 days to move out.

I've been told by the Tenancy Helpline that we can't give them their 90 days and put them on a new tenancy agreement just to get a bond - it would be seen as 'retaliatory'

90 days seems such a long time when they can pack up and leave in 21!

[PTILoveYou]

The bonds is an issue, I think you can lodge $1 so that at least there's bond registered.

[artemis]

Shades of rockabella's Market Rent thread q.v. http://www.propertytalk.com/forum/sh...ng-Market-Rent

Perhaps you should just give 90 days notice and save yourself the aggro. If you decide to give notice you need to do it quickly, before the tenant makes a TT application. Otherwise the notice will probably be set aside as retaliatory.

If you decide to keep the tenants (which does not sound like it will be fun) you do not have to say why you are increasing the rent or justifying the increase. In fact better not to say. You do not have to accept the appraisals the tenant has arranged. Other ideas are in rockabella's thread, and the TT declined to reduce the rent in that case.

If you want to work on the property with these tenants in place, they may make it difficult for you.

Edit - most tenants start looking elsewhere if given 90 days, so it might not be that long before they leave.

[Keys]

Too late for a 90 day letter. The tenant has already established that they are exercising their rights. Continue with the rent increase and wait for the TT hearing. When it is all over, issue another increase ASAP. This tenant should go but you need to do it carefully.

[PTWhatAGreatForum]

Too late for a 90 day letter. The tenant has already established that they are exercising their rights. Continue with the rent increase and wait for the TT hearing. When it is all over, issue another increase ASAP. This tenant should go but you need to do it carefully.

What your suggesting sounds like a breach of RTA 24.1(d)

Minimum 180 days between rent increases.

[BigDreamer]

Every property investor should check that the tenancy agreements are genuine before going unconditional! I have noticed that in many small towns the vendor makes up a rent amount and there is no real tenancy agreement in place - this is a recipe for disaster as you are witnessing now.

Gary - are you sure you can lodge a $1 bond without the tenants agreeing to it? I've never been in this situation but very curious to hear if it has happened in the past

[flyernzl]

First mistake - you should have agreed to purcahse the property only with vacant possession.

Then the vendor of the property would have given the tenant 42 days notice.

Once that was underway, you could have then met the tenant, had a discussion, and if you wanted to offered him a new tenancy starting from the date of settlement on your terms, conditions and rent.

If you and the tenant could not have agreed, you would have had a clean start with a new tenant who would have had no historical baggage.

That way, the power would have been in your hands from start to finish.

[Eugene]

Hi all

- the problem being then that once this is in place, we will not be able to increase the rent for a further 6 months, which gives
us little incentive to get on with tidying up the property straight away.

Any thoughts would be much appreciated.

Do as Keys says with the rent increase, which is what you seem to be doing already. Keys knows.

Get on with the tidying up. Why not? Don't you want to be the best landlord you can?

Here's how we did it.

I got references from our tenants when our nasty nasty professional couple took us to the tribunal this year wanting a rent decrease (due to the supposedly parlous state and of the property they were renting and 48 pages of whinges)

Here is the reference one tenant wrote:
'...have been our landlords since they acquired the property in January 2013 and we've been really happy during this time.
We spoke to ... quite a lot before she became our landlord about things we would love to have in the house. Once the house was purchased, they generously accommodated many of these requests. We received a heat pump, a bathroom extractor fan, a new kitchen sink and a new toilet.
When things needed fixing, ... are always prompt with resolving any issues to the best of their ability. We maintain communication and have a good professional relationship with them.
I've been a tenant in this particular property for 3 and 1/2 years and when ... purchased the property they couldn't have been more sensitive to the fact it may cause us disruptions. When alterations were being made we were compensated with a decreased rent rate until the building was finished.
We are content tenants and love the house. We think the rent is fair, the location is great and the house is in good condition.
..."

We put a wall up between the living room and another room to make another bedroom and increased the rent from $750 per week to $1000 per week.

There was a bit more horse trading before the increase finally kicked in. As the tenant said, it is about communication. And maintaining good will.

Probably looks like skiting to put in the reference, but that is how we work.

And I know not everyone can afford to spend quite a lot of money on their houses too. But I guess sometimes you can't afford not to.

[Wayne]

If it were me I would have asked for vacant possession as suggested.
Without that I would have actually imporved the property before I tried to rent it at the improved value.
You have got the tenants back up and I don't blame them.
This tenant has been there for 15 years so must be doing something right.
You have failed on the communication front. Many people fail to realise that this isn't just a property equation - you are in a service industry and communication it vital.

Most of the replies here have been along the 'bash the tenant' ilk - a bit of empathy wouldn't go amiss.

Maybe the numbers (differance between current and desired rent) are to great for the existing tenant to take but it does seem that they have some relationship with reality - after all they did get some valuations done.

[RevT]

Thanks everyone - some solid advice here.

Agreed that vacant possession would have been the best option.

What we didn't realise was that a flimsy tenancy agreement with no tenant signature nor date was still a tenancy agreement.

It is this clause that undoes that: 13C: Tenancy agreements not unenforceable on grounds not in writing

Part of the reason the tenant has their back up is because they've had a pretty good deal with the previous landlord.
And it is because of this that the rental jump is perhaps larger than usual = unhappy tenant.

Communication with the tenant, has and still is very pleasant and civil. We just have different perspectives on 'market rent'.


My original question however was can you send a rent increase notice out with a rent increase that reflects the property
after proposed tidy up work has been done? (and you plan on doing it within the 60 days).

I'm guessing technically not, and you should wait for the work to be done before sending out the notice?

[Wayne]

My original question however was can you send a rent increase notice out with a rent increase that reflects the property
after proposed tidy up work has been done? (and you plan on doing it within the 60 days).

I'm guessing technically not, and you should wait for the work to be done before sending out the notice?

Technically yes - you can send a rent increase notice out with any increase you want - but can expect it to be challanged if it appears unreasonable.
If I were the tenant I would see it as possibly a Tui moment - 'yeah right'.
Maybe you should show some progress on the improvements 1st?

It could be that the tenant like the poorer property and lower rent.
If that is the case then maybe they will ultimately have to leave.