Tenants, here’s how to negotiate a fair rental increase
National rental inflation is currently sitting between 2.89% and 6.4%, according to TPN Credit Bureau and PayProp Group. Regionally, the Western Cape’s rental inflation (12.13%) is almost four times higher than Gauteng’s (3.23%), according to TPN.
While landlords need to keep trend with national and regional rental inflation, they should also consider suburb and property type trends when negotiating rental increases with their tenants.
Tenants and landlords should, however, note that a blindly set 10% increase is neither the norm anymore (a consequence of the old Rent Control Act), nor does a landlord have to keep pace with national consumer price inflation – which in many metros is well below the annual increases in water, electricity and sanitation.
“As a letting agent with much of my portfolio coming up for renewal over the summer months, it is always interesting dealing with the expectations of both tenants and landlords and helping them meet in the middle,” says Grant Rea, rental specialist at RE/MAX Living. “In Cape Town where rentals are at a premium, the escalation of rent at the anniversary of the lease can seriously impact the tenant’s budget for the next year. This is compounded further by the lack of available long-term rentals during the season.”
Rental escalations should reflect a fair return on the landlord’s investment and should be market-related.
“Tenants need to keep in mind that the increase in rentals is influenced by supply and demand more than any other factor,” says Rea.
While tenants cannot influence supply and demand trends, they can influence their landlords on the anniversary of their lease renewal.
5 methods to negotiate a fair increase
#1 The most effective way to convey that you are an exceptional tenant is by paying on time and in full. This may mean consistently paying one day before the rent is due. This ensures that all utilities are paid promptly, which may give you leverage to negotiate a lower rental increase.
#2 Good communication is key and keeping the agent/landlord informed of any necessary maintenance and being flexible with access for repairs, will make you stand out as a reasonable tenant.
#3 Be reasonable and understanding that the agent or landlord cannot be obliged to attend to any and every small maintenance item. Sometimes fixing it yourself will aid your cause when negotiating a lower increase.
#4 Keep the property neat, clean and presentable.
#5 Keep a record of items you have attended to or improved on the property. Remind the agent or landlord of these without trying to coerce a lower increase.