California Landlord-How Much Rent Can I Ask For?

 

 

California Landlord Banner

 

You can charge whatever the market will bear. Keeping in mind that you do have competition out there and you should check local newspapers and perhaps Craigslist (if your area is served) to determine what the going rate is.

 

When is the rent due?

 

Your lease will determine when the rent is due, and it should also state the time when the late fee attaches. Make sure your tenants understand

that rent is due on the first day, stated in the lease, and delinquent on the day after. Most tenants believe that they have until the late fee attaches to pay.

 

If the rent is due on the first and delinquent on the 5th then you would be unable to list that month on a 3 day pay or quit until after the 5th.

 

RENT INCREASES UNDER CALIFORNIA LAW **

 

Whether you can raise the rent depends on whether there is a lease or a rental agreement, and what it says.

 

Some of you are using leases, instead of rental agreements, that is to say they have a definite term, usually one year. If there is a lease instead of a month to month rental agreement you can’t raise the rent. However at the end of the term you can raise the rent without notice. If, however they continue to pay after the end of the term, and you continue to accept rent, then you have created a month to month tenancy and you will need to read this article and follow the rental agreement rules.

 

For those of you using, a month-to-month rental agreement, you can increase the rent unless the agreement has a provision against it. If, however, you are increasing the rent, then you must give the tenant proper advance written notice of the rent increase. The written notice tells the tenant how much the increased rent is and when the increase takes effect.

 

How much advance notice must you give?

 

If there is a month-to-month (or shorter) periodic rental agreement, you must give you at least 30 days’ advance written notice of a rent increase.

 

The amount of notice required depends on the percentage of the rent increase.

 

You must give the tenant at least 30 days’ advance notice if the rent increase is 10 percent (or less) of the rent charged at any time during the 12 months before the rent increase takes effect.

If the increase in rent is greater than 10% percent, then you must give the tenant at least 60 days’ advance notice.

 

In order to calculate the percentage of the rent increase, we need to know the lowest rent that you, the landlord, charged you during the preceding 12 months, and the total of the new increase and all other increases during that period.

 

EXAMPLES: 1. Assume that your rent is $500 per month due on the first of the month. Your tenant has been paying this rent for over a year. You want to increase the rent $50 to $550. How much advance notice must you give?

First, calculate the percentage increase in the rent. It is:

50

500 = 10%

The current rent increase ($50) does not exceed 10 percent of the lowest rent charged in the past 12 months ($500). Therefore, you must give your tenant at least 30 days’ advance written notice of the rent increase.

 

  1. Assume that the rent is $500 per month due on the first of each month. You have charged this rent for over a year. You wants to increase the rent $60 to

    $560. How much advanced notice must you give? First, calculate the percentage increase in the rent. It is: 60

    500 = 12%

     

    The current rent increase ($60) equals 12 percent of the lowest rent charged in the past 12 months ($500). Therefore, you must give your tenant at least 60 days’ advance written notice of the rent increase.

     

  2. On January 1, 2008, you started charging monthly rent of $475. In November 2008, the rent was increased $25 to $500. Effective January 1, 2009, you want to increase the rent another $50 to $550. How much notice is required?

    The percentage increase in the rent must be calculated

    by adding all the rental increases made in the 12 months previous to January 1, 2009. Combined rent increase is:

    $ 25

    + 50

    $ 75

    The percentage of increase is calculated using the lowest rent charged during the preceding 12 months. The lowest rent charged was $475. The percentage of increase equals:

    75

    475 = 15.7%

    Since the increase is greater than 10%, you must give at least 60 days’ notice.

    How may you deliver a notice of rent increase? Your notice of rent increase must be in writing. You may deliver a copy of the notice to your tenant personally. In this case, the rent increase takes effect

    in 30 or 60 days from the date the notice is delivered.

     

    Alternately, you may mail the notice, with proper postage and addressed to your tenant at the rental unit. If you mail the notice, you must give an additional five days’ notice. That means you would have to give 35 days’ notice from the date of mailing if the rent increase is 10 percent or less. If it is more than 10 percent, 65 days’ notice is required.

     

    Timing of the Notice

     

    Most notices of rent increase state that the increase will go into effect at the beginning of the rental period. For example, if you have a month-to-month rental agreement and you wishe to increase your rent by 10 percent effective on October 1, you must make sure that the notice of increase is delivered to your tenant personally by September 1. (If you mail the notice to your tenant, you must give you an additional 5 days’ notice, so the notice must be mailed by you by August 27.)

    You may make the increase effective at any time in the month if proper advance notice is given. If the rent increase becomes effective in the middle of a rental period, your tenant is entitled to receive the increased rent for only a prorated portion of the period. For example:

  3.  

    Rental period — Month-to-month, from the first to the last day of the month

     

    Rent — $500 per month

    Rent increase — $50 (from $500 to $550) per month (a 10 percent increase)

    Date that the notice of rent increase is delivered to the tenant personally — April 15

    Earliest date that the rent increase can take effect — May 15

     

    Because you delivered the notice on April 15, the increase cannot become effective until May 15 or 30 days later. The rent payment for May would be calculated as follows:

     

    First period: May 1 – May 14 — During this period the old rental rate of $500 is in effect.

     

    Second period: May 15 – May 31 — During this period the new rental rate of $550 is in effect.

     

    • Number of days in first period — 15

    • Number of days in second period — 16

    • Prorated Rent Due for the Month of May

 

$ 500 x 15/31 = $ 241.94

+ $ 550 x 16/31 = $ 283.87

$ 525.81

 

Can you require the tenant to pay the increased rent in cash?

 

you normally cannot require the tenant to pay the rent (or the increased rent) in cash. However, you can require the tenant to pay the rent in cash if, within the last three months, the tenant has paid you with a check that was dishonored by the bank (A dishonored check is one that the bank returns without paying because the tenant stopped payment on it or because the tenant’s account did not have enough money in it.)

 

In order to require the tenant pay the rent in cash, you must first give the tenant a written notice stating that the tenant’s check was dishonored and that the tenant must pay cash for the period of time stated by you. This period cannot be more than three months after the tenant:

 

  • Ordered the bank to stop payment on the check, or

  • Attempted to pay with a check that the bank returned to you because of insufficient funds in the tenant’s account.

     

    You must attach a copy of the dishonored check to the notice. You can personally deliver the notice to the tenant, or serve the notice on the tenant using “substitute” service.

    The requirement that the tenant pay rent in cash may change the terms of the tenant’s rental agreement. If so, you must give the tenant proper advance written notice of this change.

     

    Additional Considerations

     

    image

    Normally in the case of a periodic rental agreement, you can increase the rent as often as you like. However, you must give proper advance written notice of the increase. The rent increase cannot discriminate against you or retaliate against you for exercising a right as a tenant.

     

    Increases in rent for government-financed housing are usually restricted. If you’re renting a government- financed unit, check with your local public housing authority to find out whether there are any restrictions on rent increases.

     

    Local rent control ordinances may also limit rent increases, or impose additional requirements on landlords. If your rental unit is in an area with rent control, check with your local rent control board or your local elected representative to find out whether there are any restrictions on rent increases.

     

    **California Department of Consumer Affairs

     

    Late Fee

     

    A rental agreement generally includes a pre-determined late fee. This is acceptable if it isn’t exorbitant. A late fee which is excessive and designed to punish the tenant is unacceptable. The Law abhors penalties, and the late fee imposed must be a reasonable proximate of the actual costs the landlord will incur . A late fee that is so high that it amounts to a penalty is not legally valid.

     

    Additionally late fees are limited by local rent control ordinances.

     

    The catch word, when it comes to late fees is “reasonable”. If you as a landlord are reasonable,

     

    and your late fees aren’t exorbitant then you are within the law.

     

    Other fees

     

    As a landlord you can charge the tenant other fees, such as a fee for returned check. The law allows you to charge the tenant the amount the Bank charges you, together with an additional sum to reimburse you for the costs of handling the return check. Again the amount must be reasonably calculated to reimburse you for your costs.

    For example, a reasonable returned check fee would be the amount that the bank charges you, plus your reasonable costs because the check was returned. Under California’s “bad check” statute, you can charge a service charge instead of the dishonored check fee described in this paragraph.

    The service charge can be up to $25 for the first check that is returned for insufficient funds, and up to $35 for each additional check.

     

    SECURITY DEPOSIT

     

    At the beginning of the tenancy, you most likely will require the tenant to pay a security deposit.

    You can use the security deposit, for example, if the tenant moves out owing rent, damage the rental unit beyond normal wear and tear, or leaves the rental less clean than when the tenant moved in.

     

    Under California law, a lease or rental agreement cannot say that a security deposit is “nonrefundable.”

    This means that when the tenancy ends, you must return to the tenant any payment that is a security deposit, unless you properly use the deposit for a lawful purpose, as described below and under Refunds of Security Deposits.

     

    The security deposit may be called last month’s rent, security deposit, pet deposit, key fee, or cleaning fee. The security deposit may be a combination, for example, of the last month’s rent plus a specific amount for security. No matter what these payments or fees are called, the law

    considers them all, as well as any other deposit or charge, to be part of the security deposit. The one exception to this rule the application screening

    fee. The application screening fee is not part of the security deposit. However, any other fee charged by the landlord at the beginning of the tenancy to cover the landlord’s cost of processing a new tenant is part of the security deposit. Here are examples of the two kinds of fees:

     

 

image

The Application screening fee – is charged to cover the cost of obtaining information about the tenants, such as checking their personal references and obtaining your credit reports. The application screening fee is not part of the security deposit. Therefore, it is not refundable as part of the security deposit.

New tenant processing fee – You might charge you a fee to get reimbursed for the costs of processing your tenants as new tenants. Be advised however that these kinds of fees are part of the security deposit. Therefore, these fees are

refundable as part of the security deposit, unless you properly use the deposit for a lawful purpose, as described below and under Refunds of Security Deposits.

 

The law limits the total amount that you can require the tenant to pay as a security deposit. The total amount allowed as security depends on

whether the rental unit is unfurnished or furnished and whether you have a waterbed.

 

Unfurnished rental unit: The total amount that you can require as security cannot be more than the amount of two months’ rent. If the tenant has a waterbed, the total amount allowed as security can be up to two and-a-half times the monthly rent.

 

Furnished rental unit: The total amount that you can require as security cannot be more than

the amount of three months’ rent. If the tenant

has a waterbed, the total amount allowed as security can be up to three-and-a-half times the

monthly rent.

Plus first month’s rent: You can require the

tenant to pay the first month’s rent in addition to the security deposit.

 

You cannot normally require the tenant to pay the security deposit in cash, however you can require a

Cashier’s Check, or Certified Check..

 

A payment that is a security deposit cannot be nonrefundable. However, when the tenant moves out of the rental, the law allows you to keep part or all of the security deposit in any one or more of the following situations:

 

The tenant owes rent;

The tenant leaves the rental less clean than when he or she moved in;

The tenant has damaged the rental beyond normal wear and tear; and

The tenant fails to restore personal property (such as keys or furniture), other than because of normal wear and tear.

 

If none of these circumstances is present, you must return the entire amount that the tenant has paid as security. You have 21 days from the day the tenant returns possession to you to account for the security deposit. Any expenses reported must have a receipt. Mail the statement to the last known address, with a check if there is a surplus, or with a bill if there is a deficit.