Why bank a rental increase?
November 27, 2006 3:48 PM Subscribe
Why is our landlord 'banking' our rent increase?
For the second year in a row, we have received a letter from our apartment management company that says rent is being increased by x%, but they are banking the increase, so we should continue to pay the original amount.
I'm certainly not complaining about paying less rent (or the same, as it were), but what is the property management company gaining by doing this?
For the second year in a row, we have received a letter from our apartment management company that says rent is being increased by x%, but they are banking the increase, so we should continue to pay the original amount.
I'm certainly not complaining about paying less rent (or the same, as it were), but what is the property management company gaining by doing this?
I see that you're in SF, which has a maximum annual allowable rent increase. By 'banking' the increase, they reserve the right to raise it by more than the annual allowable increase at a later date. So if you keep staying there for a long time, eventually they'll bump your rent to get it back in line with the market. What they gain by keeping your rent constant is that you won't move out. Frequent turnover can cost them a lot more than the 1.5% or whatever.
posted by Durin's Bane at 4:01 PM on November 27, 2006
posted by Durin's Bane at 4:01 PM on November 27, 2006
You live in an area where there is rent control.
The landlord likes you as a tenant and is happy to receive what you're currently paying. However, the city caps the amount he can raise the rent every year. That means he has to keep track of how much he's allowed to charge.
The implications are more than just how much he can charge at a later date if he decides to raise rents: If he doesn't raise the theoretical rent as much as permitted, he damages his property value.
Look at it this way: potential buyers of his property could either hear: "I've got 10 units and you can legally rent them for $1000 apiece," or "I've got 10 units and you can legally rent them for $2000 apiece." Which sounds more attractive to you as a buyer? Which property are you going to pay more for?
For this reason, sensible landlords almost always do what's happening to you. The chance of it affecting your actual rent is minimal, but if you're concerned, call up your landlord and ask about it.
posted by ikkyu2 at 4:18 PM on November 27, 2006
The landlord likes you as a tenant and is happy to receive what you're currently paying. However, the city caps the amount he can raise the rent every year. That means he has to keep track of how much he's allowed to charge.
The implications are more than just how much he can charge at a later date if he decides to raise rents: If he doesn't raise the theoretical rent as much as permitted, he damages his property value.
Look at it this way: potential buyers of his property could either hear: "I've got 10 units and you can legally rent them for $1000 apiece," or "I've got 10 units and you can legally rent them for $2000 apiece." Which sounds more attractive to you as a buyer? Which property are you going to pay more for?
For this reason, sensible landlords almost always do what's happening to you. The chance of it affecting your actual rent is minimal, but if you're concerned, call up your landlord and ask about it.
posted by ikkyu2 at 4:18 PM on November 27, 2006
I signed a lease for an apartment where the rent was $1200 a month, but the "maximum rent" was defined as $1600.
I asked the landlord when signing what "maximum rent" was, and he said something like "oh, don't worry about that".
What it really meant is that he could bypass a law which capped rent increases to 3-4% per annum. The neighbourhood became more trendy, and so when the lease expired, he bumped the rent to $1500.
I ended up moving.
You might want to watch out for the same trick.
posted by kamelhoecker at 6:31 PM on November 27, 2006
I asked the landlord when signing what "maximum rent" was, and he said something like "oh, don't worry about that".
What it really meant is that he could bypass a law which capped rent increases to 3-4% per annum. The neighbourhood became more trendy, and so when the lease expired, he bumped the rent to $1500.
I ended up moving.
You might want to watch out for the same trick.
posted by kamelhoecker at 6:31 PM on November 27, 2006
The rent control explanation is most likely.
For what it's worth, under CA law it might also affect how much notice the landlord has to give for a future rent increase. While it's unlikely that this is the landlord's motive, you still should be aware of this side-effect. A 10% or greater increase normally requires 60 days notice instead of 30 days for a smaller increase. As long as a future increase stays under that 10% threshold, it'd probably be legal to start charging it plus the banked increase on 30 days' notice. It'd probably be a good idea to put an amount equivalent to 1-2 months' rent increase into the bank, just to cover your bases.
posted by nakedcodemonkey at 6:42 PM on November 27, 2006
For what it's worth, under CA law it might also affect how much notice the landlord has to give for a future rent increase. While it's unlikely that this is the landlord's motive, you still should be aware of this side-effect. A 10% or greater increase normally requires 60 days notice instead of 30 days for a smaller increase. As long as a future increase stays under that 10% threshold, it'd probably be legal to start charging it plus the banked increase on 30 days' notice. It'd probably be a good idea to put an amount equivalent to 1-2 months' rent increase into the bank, just to cover your bases.
posted by nakedcodemonkey at 6:42 PM on November 27, 2006
The rent control explanation, including mention of the option to "bank."
posted by phearlez at 1:06 PM on November 28, 2006
posted by phearlez at 1:06 PM on November 28, 2006
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posted by dirtynumbangelboy at 3:53 PM on November 27, 2006 [1 favorite]