Ask a lawyer – Is a variable rental increase legal?
Is a residential lease agreement without an annual fixed-percentage increase legal?
There is nothing unlawful about having a lease that is subject to a variable annual escalation in rental. In fact, this has become somewhat of a common practice of late.
The overriding principle, however, is that the increase to be imposed upon the tenant may not be excessive, unfair or unreasonable. It is for this reason that most leases, which contain clauses of this nature (i.e. allowing for a variable increase), also provide that the percentage increase is to be negotiated and agreed upon between the landlord and tenant.
There are numerous factors that must be taken into account when negotiating/determining the increase in rental. One of the most important of these factors being the comparative rentals received for similar properties in the area concerned.
The increase in rental should thus reflect market-related trends, and should be aimed at ensuring that the landlord receives a fair market related rental, whilst at the same time ensuring that the tenant pays a fair market-related rental.
In some instances it may be justified to impose a substantially greater percentage increase, so as to bring the rental into line with market trends, in others it may be necessary for the landlord to accept a far lesser percentage in order to ensure that the rental being charged is not excessive.
It is worth mentioning that in the event of the landlord seeking to impose an unfair/unreasonable increase in rental, the tenant will be entitled to take this issue up with the Rental Housing Tribunal, as this would constitute an unfair rental practice.
I, therefore, conclude that as long as both parties are willing to act reasonably, there is no difficulty in making provision for a variable increase in rental (as opposed to a fixed annual percentage increase) in a lease agreement.
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Who is Marlon Shevelew?
Marlon Shevelew is the director of Marlon Shevelew and Associates Inc, a law firm specialising in rental property, sectional title, contractual, consumer and company law.