While there may be circumstances under which these guidelines cannot be followed, the following voluntary guidelines are submitted for the consideration of residential property managers and owners:
1. Keep rent increases reasonable for your residents.
2. Give your residents predictability and the opportunity to plan ahead;
* Provide at least a 60 day notice for rent adjustments, even if only 30 days notice is required by California Civil Code 827.
* While the California Civil Code does not set an upper limit on rent adjustments upward, there is a widespread perception, due in part to California Civil Code 827 which states "10% or less requires 30 days notice, over 10% requires 60 days notice", that therefore a rent increase of over 10% during the 12 months prior to the effective date of any such increase is excessive, whereas a rent increase of 10% or less may not be excessive. Notwithstanding that there is no upper limit on upward rent adjustments, consider limiting upward rent adjustments to 10% or less of the rental amount charged to the occupant at any time during the 12 months prior to the effective date of the adjustment.
* Consider adopting a policy of one annual rent adjustment. If you offer residents long-term leases, attempt to incorporate annual rent increases, if any, into the lease.
* If your monthly rent is below "market", in your opinion, do not attempt to bring the monthly rent up to "market" suddenly for your existing residents. Instead, phase-in any such rent adjustments over an extended period, bearing in mind the residents' rent history at your property and the residents' economic circumstances.
3. Attach a sensitively written letter to your notice of rent
adjustment.
4. Point out any increased operational costs such as taxes, utilities,
maintenance, and debt service.
5. Point out upcoming or recent improvements to the property.
6.Consider using the Cost of Living Index (CPI) as a guideline for
rent adjustments. CPI information is available from the U.S. Department of Labor, Bureau of Labor Statistics, Fax-On-Demand, phone (415) 975-4567. Consider using the San Francisco-Oakland-San Jose CPI, All Items, for Urban Wage Earners and Clerical Workers (CPI-W), although there are also other indexes available to use. Provide the resident with a copy of the published CPI schedule you are using. The CPI is used as the basis for rent adjustments in many commercial leases. If expenses of the property, whether for maintenance or improvements have been extraordinary, consider using the CPI as a basis, plus other percentage point(s) to cover the increased expenses of the property for the prior period of the CPI being used.
7. Even though many properties will not support a calendar year end "rent rebate", if after all expenses, debt service and return on investment are paid and the property supports a "rent rebate" at the end of the calendar year (December), consider giving a rebate of some amount of rents paid for the prior year to residents in the form of a gift. It will be appreciated, especially in December. Example rebate: $100-$200, or more, or less.
8. When residents want to discuss their rent adjustment, be knowledgeable about their rent history at your property; be willing to listen to them openly and consider special arrangements, such as a phased-in rent adjustment, for hardship cases. |
9 Attend to all maintenance requests promptly. They are part of the
costs of doing business. Do not begrudge residents their requests for maintenance or repair, or even improvement to the property. Residents may be hesitant to make repair requests for fear that the rent will be increased. While increased maintenance expenses may be a factor in a decision to adjust rents, a rent adjustment notice should not be used as a response to maintenance and repair requests from particular residents. Be aware of the interior condition of the residents premises.
10. Be responsive if a mediation agency calls and be willing to enter
into a mediation discussion. This is an important communication vehicle, and usually is at no expense to the parties.
11. If you plan on adjusting rents after a current resident vacates, to
be effective with the new resident, consider the following;
* New resident(s) may face the same economic problems of affordability as your existing resident(s).
* There will always be another owner who charges either a higher rent or a lower rent for premises comparable to yours. You do not always have to rent to new residents at "top of the market". While rents are a function of supply and demand, consider not maximizing rents due to a shortage of supply. If you do so, when supply increases, or residents relocate to less expensive geographical areas, yours may be the first premises that will become vacant.
* For new residents, consider requiring the first months rent plus security deposit (including all deposits, security, pet, etc.), and not requiring a last month's rent deposit. Keep security deposits reasonable. Do not however accept a security deposit piecemeal or over time.
12. Consider how your actions concerning adjusting rents may affect the public perceptions of you, your company and the industry. You are in the business of providing rental housing, and your residents are your customers. As in any business, you should strive as much as possible to satisfy your customers at all times, which is the foundation for business success.
We are in a housing crisis of short supply and high demand in Monterey County. By following the above voluntary guidelines, you can be a part of the solution to the problem of how to provide affordable rental housing in Monterey County.
The above voluntary guidelines are suggestions for the property manager and owner's use in their absolute and unqualified discretion. None of the above suggestions are meant to be involuntary, coercive, or in furtherance of violation of any anti-trust, price fixing, or any anti-competition laws.
Apartment Association of Monterey County
975 Cass Street
Monterey, CA 93940
Telephone: (831) 649-4704
Facsimile: (831) 649-8126 |
