Prices go up, so the rent has to go up sometimes too. The question is how to do it and keep a good tenant. A well-prepared increase announced in advance rarely causes trouble. An unexpected one with no explanation can easily end in a tenant changeover.
Put it in the contract up front
Most disputes start because the method of increasing the rent isn't written down. That's why it's one of the ten points of a contract. If the contract doesn't cover it, you generally have to agree on any increase.
This matters especially for fixed-term contracts. If there's no increase clause, the rent as a rule stays at what you agreed for the whole term. So as a landlord, decide at signing how the rent can change over one or two years.
Common approaches
- Yearly in line with inflation, based on the consumer price index of the statistics office (KSH).
- A fixed percentage each year, for example 5%.
- Renegotiation when the contract is extended.
Tracking inflation
The most common approach, and the easiest to accept. The contract states that the rent changes once a year, from a given month, by the previous year's average annual consumer price index. Anyone can look the figure up on the KSH website, so there's nothing to argue about.
It's worth setting a cap too, for example that the increase can be at most 10%. In times of high inflation this protects the tenant, and that means a lot to a good tenant.
Fixed percentage
Predictable for both sides: the tenant knows in advance what they'll pay. The downside is that it doesn't follow real price changes. If inflation is much higher, the landlord loses out; if it's lower, the tenant does.
Renegotiation
Flexible, but the least predictable. It works well if the market is moving fast, or if the flat has been significantly upgraded in the meantime, for example with a new kitchen or air conditioning.
How to tell your tenant
In writing, at least one or two months in advance. State the new amount, the start date and the reason. A market comparison, such as Budapest rents, helps a lot.
A good notice is short:
- The new amount, to the exact forint.
- The start month from which it applies.
- The reason: inflation, higher common charges, improvements to the flat.
- The contractual basis, if the contract has a clause for it.
If the tenant has questions, give them time. A week to think it over costs far less than a notice to leave.
How much should you raise it?
Check what similar flats in the area go for. If your rent is already at the top of the market, an increase can quickly lead to a tenant changeover. If it's well below, a bigger step may be justified, but even then it's worth doing it in two stages.
Common charges, insurance and maintenance costs count too. If they've risen significantly, mention it in the notice. A tenant accepts an increase more easily when they can see what's behind it.
Don't lose a good tenant
A reliable tenant who pays on time is worth a lot. One lost month often costs more than you gain from the increase. That's what our article on empty months is about.
A simple calculation: raise a HUF 200,000 monthly rent by 5% and that's HUF 10,000 a month, HUF 120,000 a year. If the tenant moves out because of it and the flat sits empty for a month, the HUF 200,000 loss wipes out more than a full year of the increase, not counting cleaning, advertising and your time.
How the tenant sees an extension is covered in this article.
FAQ
Can I raise the rent during a fixed-term contract?
If the contract has an increase clause, then according to that. If not, you need the tenant's consent to change the rent.
What if the tenant doesn't accept the increase?
With an open-ended contract, either party can give notice under the contract's rules, but try negotiating first. Often a smaller increase or a later start date works for both sides.
Can I raise the rent retroactively?
It's not a good idea, and without the tenant's consent you can't. An increase always applies to the future.
Rentkey
In Rentkey, when you create a contract you set whether the rent should follow inflation. If you're unsure what your contract allows, you can also ask the Legal Assistant.
